Property Development Advice Required - Tax Implications Etc.

RossF1984

Hi,

As stated in a previous thread I am moving abroad to work whilst my family stay here in the UK.

The plan whilst I am out there is to buy another property (we currently have one, our current home, with a small mortgage on it), develop it, sell it, use the profit to buy another one, develop it, sell it and so on and so on.

We aim to do this approx. 3-4 times to enable us to build a healthy deposit for our dream house when I return. The plan is to generate approx. £30-40k profit to throw at our new home upon my return.

Our concern is the tax implications that may come with this ie. Capital Gains Tax or income tax on the profit. We both work full time although I will be outside of the UK.

Can anyone shed any light on whether there are any thresholds that can be exceeded etc?

Thanks in advance.

Ross

dimbo61

I think a better point would be can you make any money?
If you buy say a house/flat for £100,000 and spent £25,000 doing it up will it be worth £125,000 or more !!!
Buyers come along and love the property you have just refurbished over the last 6 months but the Surveyor looks up recent sales and BINGO finds you paid £100K only 6 months ago.
With this being the only recent sale in the area your property is not worth £125K never mind a profit on top.
You need to get all the Certificates as well FENSA for windows which window company must fit!!
Electrics from qualified Electrics person , gas safe boiler person etc

kinger101

Post this on the tax forum as well. You'll get better responses.

As your purchasing property with the motive of selling it on at a profit, then this well be treated as a trade. Any profits as such will be subject to income tax (rather than CGT).

You'll need to provide some additional info to get a meaningful answer.

Details include;

income of your spouse;
where you're going to live (can effect entitlement to personal allowance);
how many days you will spend in UK each year;
how long do you plan to be away?

You wiil need to pay tax on all trading income in the UK.

Of course, you will also need to find out taxation rules for wherever you'll be living, and whether there are any double-taxation treaties for that country.

go_the_extra

don't do it, most other countries do not have a property value culture as in the uk. you will find it hard to make a short term profit.

somethingcorporate

I agree with the rest, you are about ten years too late to make a quick buck out of the housing market.

Buying and selling costs alone on 3-4 house purchases is going to hugely eat into your profits and unles you can do the work yourself the return is unlikely to cover the cost of doing it.

carlx

go_the_extra wrote: »

don't do it, most other countries do not have a property value culture as in the uk. you will find it hard to make a short term profit.

I think he/his family wants to do property development in the UK while he is out of the country and ready for his eventual return in order to purchase their dream home.

somethingcorporate wrote: »

I agree with the rest, you are about ten years too late to make a quick buck out of the housing market.

Buying and selling costs alone on 3-4 house purchases is going to hugely eat into your profits and unles you can do the work yourself the return is unlikely to cover the cost of doing it.

That is not true, it is a mindset like this that puts a lot of people off. I develop property and started just 3 years ago. At the start i did 90% of the work myself, on my first property (3 years ago) i bought £35k under the initial asking price (asking price was originally £105k), spent £28k on a full refurbishment and sold it after 6 months for £132k (to avoid tax as it was classed as my primary residence).

I now have a small team of tradesmen who regularly work on my properties, i manage each development and sort out schedules and purchasing etc. I make less profit per house doing this, but i don't get my hands dirty very often and i still make enough money after tax to be classed as a 'decent earner'

My advice to any would-be developer is this;

The profit is in the purchase price, research your area, haggle, buy as low as you can coerce the seller to go, have a clear budget in mind prior to putting your offer in and stick to it.

Also remember, the house is only worth what somebody is willing to pay, don't assume your solid gold taps will add £100,000 to the price of a £100,000 house.

In regards to tax, i run my business as a limited company, pay myself my maximum tax free allowance every year and take my maximum tax free dividends payment every year - the company still has plenty of profit to continue to grow and increase my buying power and i get paid as much as i need to live.

I hope that helps.