Tax on profits/capital gains?

noddynoo

Hi I haev a lot of equity in my house (300k)and we are thinking of selling up and moving in to rented for a few years and using the money to develop property in between.Will we have to pay tax on the initial sale eg our current home.And once we develop a property how is the tax calculated on profits?Is it just taken as a salary or is there a set % for property?Thanks!

silvercar

The good news is that there is no capital gains tax (CGT) to pay on the profit made on your main home (principal private residence PPR).

on any development of property, there would be tax to pay, based on the profit you make, though you do have an allowance of £8,800 a year each.

If this became a "business" the revenue may try to claim income tax as well.

Ian_W

If you're looking to be a "property developer" for quite a number of properties, as sound to be the case, I'd get some professional advice first as to the most tax efficient way to structure things.
If you are developing regularly for profit [and why else would you do it?] I don't CGT [or the £8,800 annual exemption] will apply. I think the Revenue use a phrase like, "an enterprise in the nature of trade" which means you'll be liable for income tax on your profits.
Whether you set up as a sole trader, partnership or limited company will affect the tax you pay will so it's important you structure it right from the start.

benood

If you only own one property at a time you can nominate it as your PPR even if you're living in rented. However, do it more than once or twice in a 3 year period and you're at risk of being classified as trading and being taxed on your profits from the "business"