How JustAnswer Works:
  • Ask an Expert
    Experts are full of valuable knowledge and are ready to help with any question. Credentials confirmed by a Fortune 500 verification firm.
  • Get a Professional Answer
    Via email, text message, or notification as you wait on our site. Ask follow up questions if you need to.
  • 100% Satisfaction Guarantee
    Rate the answer you receive.
Ask bigduckontax Your Own Question
bigduckontax, Accountant
Category: Tax
Satisfied Customers: 4971
Type Your Tax Question Here...
bigduckontax is online now

If I buy a property renovate it then sell it and buy another

This answer was rated:

If I buy a property renovate it then sell it and buy another and do the same am I charged income tax or capital gains tax if the latter is there any relief available? Thanks
Hello, I'm Keith and happy to help you with your question.
Under the circumstances you describe HMRC will almost certainly classify you as trading in property and your transactions will be subject to Income Tax. HMRC have been known so to do even if only one property is involved. If HMRC do not so classify, your activities then your liability will be to Capital Gains Tax (CGT).
CGT is chargeable on the gain, the difference between purchase price plus buying costs plus renovation coats and selling price less selling costs. There is an Annual Exempt Allowance (AEA) of 11K. AEA is an 'use it or loose it allowance' so you will appreciate that staggering sales over two tax years might be advantageous.
I am away in a few moments until lunch time should you have any follow up inquiries.
Customer: replied 3 years ago.

Hi Keith

How do I find out how the HMRC would classify me?



You won't Lynda until you make your annual self assessment tax return and declare the capital gain. At this point they may, or may not, make a decision. You could always ask them in advance, of course, but I would be inclined not to go down that path; it's inviting a decision to classify as a trader. Higher income tax rates are 40% and 45% whilst CGT is a mere [ha, ha] 18% or 28% depending on your income including the gain in the year(s) of sale.
bigduckontax and other Tax Specialists are ready to help you