Property CGT - again

ednotdave

I live in a rented house with my wife and kids. If we buy a run-down property, improve it and sell it on, would we still be liable for CGT, even though we don't own another property? - If so, it doesn't seem fair...

lisyloo

If we buy a run-down property, improve it and sell it on, would we still be liable for CGT

You may be liable for income tax and not CGT which is probably worse.

If you are doing something up as a business and selling it on then it would be income tax.
If it's a personal asset your selling then it's CGT.

I'm not totally sure how the inland revenue would view your transaction but certainly if you did it a number of times then it would be the former and income tax would apply.

If so, it doesn't seem fair

I can see both points of view.
I understand your point, but if you did up cars for a business them would you expect to get one each tax free just because you didn't personally own a car?
I would say no

The exemption is for your personal property not for business assets, but I can understand why you feel hard done by.

One way round it would be to buy something that was habitable and live in it whilst you were doing it up.
It would mean you need a habitable property but I think you would find it difficult to buy an unhabitable property unless you have lots of spare cash because they are hard to get mortgages on.

Rafter

I think you should be able to get around this by living in the property, even for a couple of weeks before you sell it on. In this way it becomes your principle private residence and not subject to capital gains tax.

A qualified accountant or the inland revenue helpline should be able to confirm this for you.

ednotdave

This is soooo not fair!

...If a landlord with, say, 10 properties let out, decided to sell them all, wouldn't he/she be liable for CGT instead of Income Tax?

And...if they were sold one per year, he/she would get the annual allowance (currently £8200) on each one...

Living in the property while doing it up isn't an option for us...anyone got any bright ideas?

...anyone...?

ednotdave

...So that's a "no", then...

Robert_Sterling_3

Live in a caravan parked on the premises of the house you will own?

lisyloo

Living in the property while doing it up isn't an option for us

Can you explain why this isn't an option for you?

Do you realise that if you buy an unhabitable property then you could find it difficult getting a mortgage?

Live in a caravan parked on the premises of the house you will own?

I am not a tax expert but my guess is that this still means the property is not your main residence.

Just something else to point out (as I always do) but the property market is dead as a dodo right now and in some areas prices are falling.
Do you really think you can make a profit here in a market that looks like it going to fall.

We have had 8-10 years of boom and the last 5 interest rates look like they have made affordability hit the limits.

We are either in for a long period of sideways prices (perhaps falls in real terms) or a much greater crash.

You would be buying into a market that quite dead in the south and maybe has a few years left if you are in the North.

I would suggest speaking to the Inland Revenue to check the information you have been given so far.
i.e. whether it is income tax or CGT and whether you can live in the caravan.
None of us are tax experts so you need to check it out properly.

gus

whoever said tax was fair??

If you sell a property at a profit surely you should expect to pay some tax.

If property is held in joint names, the gain will be split and you could both use your annual exemption.

Or if your wife pays tax at a lower rate than you may be worth holding in her name.

petecol_2

8)having made enquiries myself of an accountant it seems living in a caravan on a property does go some way towards qualifing for tax exemption. in our own case, a barn conversion with no roof as yet, when we have created a livable space in the house, six months habitation will serve to qualify for no CGT. Otherwise most accountants would advise a years habitation. Of course it also has to be your only or main home.