How to calculate profits on buying and selling

robert_harper_2000

Flat £100,000

Fees £4,000
Renovation £5,000

Sell £130,000

Fees on selling? £4,000 ??? - not sure?


Profit
£100,000 + £4,000 + £5,000 + £4,000 = £113,000

£130,000 - £113,000 = £23,000

Capital Gains Tax 20% of £23,000 = £4,600

Profit £18,400

Does this make sense? Of course the other option is to rent

hcb42

got no idea how you will turn £5K renovation into £30K profit.

Also why would fees on buying and then selling be the same. Selling will involve an Estate Agent....(normally...)

robert_harper_2000

I just used a 'X' figure just to get my head around figures. I meant assuming the above and with the fees I wasn't sure and would like advice

pinkshoes

Have you been watching Homes Under the Hammer?!

robert_harper_2000

lol yes I have. We are watching it now

JQ.

Finance costs - over the whole period, as it could take 2 years to sell
Insurance - will be more expensive if no-one is in occupation, again could be 2 years
Contingency - 2-5% of reburb costs however, on a £5k refurb, I'd have a budget of £1k
Where have you got your renovation costs and fees from - have you just made them up, or are they actual quotes. If you've never done this before you need actual quotes - a £5k refurb will not stretch as far as you think.
Where have you got your values from - spending £5k to add £30k to the value sounds amazing , are you sure the numbers are correct.

ps.
if that's the quality of your maths, you might want to stick to the day job. £130k - £113k does not equal £23k

hcb42

don't watch reruns of Sarah Beeny from 2005 whatever you do, or £100K flat will be £200K

CLAPTON

for cgt purposes you might like to note that you have a cgt allowance of 10,600 and that the tax rate for cgt is 18% or 28% depending upon your income

robert_harper_2000

Stand corrected. I knew that, just testing you guys are paying attention. Well done. Ahem.

With the CGT I am on a income already so what the 0% would be gone and the other bands - what are they at?

The numbers sound good but they don't exist. I was just trying to get my head around it all.

00ec25

robert_harper_2000 wrote: »

Stand corrected. I knew that, just testing you guys are paying attention. Well done. Ahem.

With the CGT I am on a income already so what the 0% would be gone and the other bands - what are they at?

The numbers sound good but they don't exist. I was just trying to get my head around it all.

you have misunderstood how CGT works
also if you buy a property with the intention from the outset of refurbishing it and immediately selling it then you might be considered to be a property developer and so subject to Income Tax on your profit not CGT - yes you may get away with it if you don't tell HMRC but they do have lists of every property bought and sold and can spot things themselves.

Re CGT - everyone is given an allowance of £10,600 for tax year 11/12. You deduct this from your total gain to get your taxable gain,
you then add the taxable gain to your other income to determine if you will pay any of the CGT at the 28% rate

eg
The higher rate (income) tax threshold is 35,000 + 7475 = 42,475.
Say you have a salary of 24,000pa and a normal (income) tax code of £7,475. Therefore 42,475 - 7475 - 24,000 = 11,000. So you have £11,000 left at the lower rate

using your figures you make a gross gain after costs of 17,000, so
deduct 10,600 allowance = 6,400 taxable gain

6,400 is within your residual 11,000 remaining total so CGT would all be at 18%

But lets say your salary was 30,000, then you'd only have 5,000 remaining, so your £6,400 gain would straddle the boundary and you'd pay 5,000 @18% and 1,400 @28%

robert_harper_2000

I'm pretty much a border line higher tax earner. So this would be tax at the higher rate. I don't know why I thought it was 20% but it would make it 28%? wow eats a lot of the profits then