income tax property

hackneyhouse

hello,

I am converting my house into two flats. I live in it, its my primary sole residence. I am planning to sell one flat to clear my mortgage and live in the other flat mortgage free. I will gain on the sale of the flat but it just pays off my mortgage loan.
Sopmeone says it'll be subject to income tax, is this true? he says its property development. Is this true?

I plan to remain in one of the flats. In the future I may sell and move on of course or may sell both at once buying elsewhere. Is income tax an issue I need to look into and how?

Thanks


EastLondon

John_Pierpoint

Would the rent on the second flat cover your mortgage interest ?

hackneyhouse

hi there

I wouldn't rent it necessarilly, I plan to sell it to pay off my mortgage and live in the remaining flat. However I may have to rent it and yes it would cover my mortgage but only just, in fact will leave a small shortfall.

thanks

00ec25

you have undertaken the works with the intention of selling on for a profit. HMRC rules are that this means it is subject to Income Tax even if this is your first (and only ever) transaction

So yes they regard it as property development. They will not let you have this fully under CGT Private Residence Relief because of the above reason.

read this http://www.poweraccountax.co.uk/Property_Developer_Tax_Implications_154.aspx