Capital GainsTax issue after watching Homes Under the Hammer

tonytee

On a recent programme of Homes Under the Hammer a lady was buying property (in need of total refurbishment), moving in and doing it up. The, seemingly getting bored of it and selling and moving into a different property and doing the same.

If its her main residence then she wouldnt be liable to pay any tax would she? What's stopping everyone from doing what she does as a cover for a money making business (ie buying, renovating and selling for property)

Can someone tell me if this is allowed as this is something that I would consider.

Thanks in advance.

tonytee

anyone know? would u have to pay any tax? or maybe because its your main home you dont have to pay any tax....

anyone?

FraudBuster

Home owners who have failed to declare their capital gains could soon be facing bills running into thousands.

http://www.telegraph.co.uk/finance/personalfinance/investing/7472116/HMRC-targets-property-tax-evaders.html

Annisele

tonytee wrote: »

What's stopping everyone from doing what she does as a cover for a money making business (ie buying, renovating and selling for property)

One of the things "stopping everyone" is that in any case you only pay tax on profit - and there's no guarantee you'll make any of that renovating houses!

Fire_Fox

tonytee wrote: »

If its her main residence then she wouldnt be liable to pay any tax would she? What's stopping everyone from doing what she does as a cover for a money making business (ie buying, renovating and selling for property)

1. inability to recognise a genuine bargain
2. lack of taste in decor/ eye for quality and detail
3. capital to afford the renovations
4. the recession
5. lenders won't touch it if the vendor has owned less than six months.

The property market is a good long term investment but short term it is a gamble, just like playing the stock markets. A few people who have done a LOT of research and have natural talent make a profit, but an awful lot of would-be developers break even or make whacking loss. Do you have an idea how time consuming project managing is?

silvercar

The real problem is what counts as a gain and what counts as trading. Ideally doer-uppers want everything to count as a capital gain (max tax rate is 18%) rather than be accused of trading and have to pay NI contributions and income tax.

General guidelines suggest that living in the property after doing it up qualifies you to be making a gain ( and using principal private residence relief to avoid tax on most of it) rather than selling up straight away which would count as a trade.