Tax implications for renovation project

KoalaBoy

Hello MSE-ers!

Long time lurker, first time poster...

I've just found myself in the awesome position of being able to buy a property that I'm going to renovate and sell. I've tried to read up as much as I can around the tax implications of doing so but I thought that the hive mind of MSE might be able to help.

I believe that as I'm intending to renovate and sell that this means that any profit from sale is subject to income tax (rather than CGT) and that it's added to my other income. I have a few questions based on that assumption:

- Have I got that right? Is this an income tax issue rather than a CGT issue?
- What's the status of that if my partner is also on the deed? Do we split the profits from the sale and each add half to our respective incomes?
- Where should I look to find out which expenses required to renovate the property are tax deductible?
- Is there anything else I should be especially aware, or vigilant, of?!

Thanks in advance for your help!

Koala

Mutton_Geoff

KoalaBoy wrote: »

Hello MSE-ers!

Long time lurker, first time poster...

I've just found myself in the awesome position of being able to buy a property that I'm going to renovate and sell. I've tried to read up as much as I can around the tax implications of doing so but I thought that the hive mind of MSE might be able to help.

I believe that as I'm intending to renovate and sell that this means that any profit from sale is subject to income tax (rather than CGT) and that it's added to my other income. I have a few questions based on that assumption:

- Have I got that right? Is this an income tax issue rather than a CGT issue?
- What's the status of that if my partner is also on the deed? Do we split the profits from the sale and each add half to our respective incomes?
- Where should I look to find out which expenses required to renovate the property are tax deductible?
- Is there anything else I should be especially aware, or vigilant, of?!

Thanks in advance for your help!

Koala

Will this be your only owned (primary) residence? If so, there is no tax unless you rent it out then rental income will be taxed with your other income (subject to offsettable costs) while any capital gain will be taxed as capital gains tax. If you buy and sell it as your primary residence, whether shared with someone or not, then there is no tax to pay.

This is the beauty of doing up your own house for gain, any profit is tax free. At the moment.

Doozergirl

Mutton_Geoff wrote: »

Will this be your only owned (primary) residence? If so, there is no tax unless you rent it out then rental income will be taxed with your other income (subject to offsettable costs) while any capital gain will be taxed as capital gains tax. If you buy and sell it as your primary residence, whether shared with someone or not, then there is no tax to pay.

This is the beauty of doing up your own house for gain, any profit is tax free. At the moment.

There was no mention of living in it. It's to renovate and sell, so subject to income tax.

There is a book called Tax Secrets for Property Developers & Renovators which isn't very long, isn't very cheap but will save money somewhere along the line.

https://www.property-tax-portal.co.uk/tax_secrets.shtml

00ec25

Mutton_Geoff wrote: »

Will this be your only owned (primary) residence? If so, there is no tax unless you rent it out then rental income will be taxed with your other income (subject to offsettable costs) while any capital gain will be taxed as capital gains tax. If you buy and sell it as your primary residence, whether shared with someone or not, then there is no tax to pay.

This is the beauty of doing up your own house for gain, any profit is tax free. At the moment.

OP has made it plain he is very well aware that intending from the outset to buy with a view of refurb and selling on is property trading, not property investing so is subject to income tax.

https://www.gov.uk/hmrc-internal-manuals/business-income-manual/bim60530

Whilst you may be able to get away with your plan if you were to actually live there - which OP has not suggested he intends to do - it would still be at risk of being caught later on, especially if you repeat the exercise.

00ec25

KoalaBoy wrote: »

- Have I got that right? Is this an income tax issue rather than a CGT issue? yes, income tax due to it being property trading
- What's the status of that if my partner is also on the deed? Do we split the profits from the sale and each add half to our respective incomes? "partner" = legally married? = split according to underlying ownership shre if TIC or 50/50 if JT. Unmarried? = split share as you wish.
- Where should I look to find out which expenses required to renovate the property are tax deductible? if you are genuinely buying to refurb and sell then all costs incurred doing the work are allowable

do as suggested above and buy a book

ultimately though all you need to know about tax is in the HMRC manual ...
https://www.gov.uk/hmrc-internal-manuals/business-income-manual

AnotherJoe

Whilst in theory if you move in to live there as your main residence and do up intending to flip tax is due, in practice if its a one off or first time, you won't be paying tax.
Certainly if it isn't your main residence then income tax is due.
And yes, if your partner is on the deeds then whilst normally you would split 50/50 it may be advantageous to split lopsided. For example if you are high rate taxpayer and partner is basic rate, then 90/10 in basic rate favour would lower tax all round. To do that there's a form you need to fill in to let HMRC know, you'd have to google for the right one.