Taxes & Strategys: Home Renevations

Shaney94

So i’ve came onto this forum and I have had a read through certain topics and was wanting more clarity on this as i’m looking to get into this full time.

So first of all I was looking for tactics on how to get the most out of this. Currently I’m working full time and would love to buy for example 2 properties at 50k each as opposed to one at 70k as it would give me a full time job? Whats the best way to go about this?

If i decide to make this a business would i be liable to pay council tax if i claim im not living in it? Also do i need to pay 40% on profits for capital gains? Are there any other taxes i’m missing out here? I’m looking to do this full time with a 6 month buy/renovate/sell turnaround 

kinger101

Council tax rules vary from council.  You might even pay more if you're not living in it.
You'd pay income tax, not capital gains tax.  And in any event, CGT hasn't been 40% in ages.
What makes you think you'd be any good at this?  You seem to know practically nothing about it which isn't a great sign.

oldbikebloke

Shaney94 said:

So i’ve came onto this forum and I have had a read through certain topics and was wanting more clarity on this as i’m looking to get into this full time.

So first of all I was looking for tactics on how to get the most out of this. Currently I’m working full time and would love to buy for example 2 properties at 50k each as opposed to one at 70k as it would give me a full time job? Whats the best way to go about this?

If i decide to make this a business would i be liable to pay council tax if i claim im not living in it? Also do i need to pay 40% on profits for capital gains? Are there any other taxes i’m missing out here? I’m looking to do this full time with a 6 month buy/renovate/sell turnaround 

you haven't done much reading then. So you wish to set up a business buying, renovating and selling on properties.

therefore you will be trading as a property developer. You will be liable to income tax, not CGT, on your profits. 
Council tax liability will depend on the nature of the renovation work you do, to be clear, it will be a great struggle to get a property exempted from council tax whilst work is underway whether you live in it or not,

you claim this will be a full time occupation, what building trade skills do you have to enable you to do this?
Also you idea that you can live there and claim it is exempt from income tax because it is your home whilst turning a property around over a 6 month period will not wash. Your pattern of activity and everything you say labels you as a trader, not an investor.

Doozergirl

Good luck trying to make a profit on houses that cheap.    The prices still haven't recovered to 2008 levels in many areas like that.  

The work required costs more than the house is worth in most cases.  

If this is a full time job then how much do you expect to bring home?  The risks are massive.  

Davesnave

Doozergirl said:

Good luck trying to make a profit on houses that cheap.    The prices still haven't recovered to 2008 levels in many areas like that. 

And  they're probably about to take a further dive. Might be short term, might not, but either way they're not the properties where people make money flipping; indeed, even before the plague, property speculation in many 'hot' areas was getting tricky.

AlexMac

Don't worry about tax as it's unlikely you'll make enough to pay CGT (at 18% on gains over the £12.3k threshold for people earning under £50k; but you knew that because you have Google, right?).

In your circumstances it might be better to buy just one house; the cheapest place in the best street/area you can afford, live in it, improve it, keep it for at least six months, and when you eventually sell, pay no tax as that doesn't apply to your primary residence... And meanwhile you've had somewhere to live, so you've not been paying rent.

I did that once; bought a wreck at auction for £67k plus fees & legals, spent £25-30k doing it up then sold three years later for £180k.  I'd been made redundant, so had planned to do most work myself, but a job came up so I used builders for the new roof, electrics, central heating,  plumbing, bathroom, new ceilings, etc. I just fiddled about (removed six bin bags of rotting pigeon carcasses and guano from the leaky loft, fitted the kitchen and did basic carpentry in my spare time). But I made more money in 3 years from the house than I did in wages from the day job!

BUT...
 And it's a big but,

That was in the crazy late 1990's and early 'noughties, when in my area of London at least, house price inflation was topping 15% p.a.... and that probably earned me more than the "added value" of my renovation of a dump to a des.res. 

That ain't gonna happen now; in fact it didn't happen a few years laterwith another amateur house improvement project; I almost got burned.   

I bought another wreck in a cheaper, poorer coastal town for £150k odd at the peak of the market in 2007, just before a recession and 25% house price crash. Had to spend £25k again ... Sold at £172k a few years later so a loss; although as we'd bought it as a holiday home, then let it out when things got rocky, we got out flat.

Do it now, and you might well lose money as Doozergal sez...

 Best wishes finding a proper job!

Comms69

Shaney94 said:

So i’ve came onto this forum and I have had a read through certain topics and was wanting more clarity on this as i’m looking to get into this full time.

So first of all I was looking for tactics on how to get the most out of this. Currently I’m working full time and would love to buy for example 2 properties at 50k each as opposed to one at 70k as it would give me a full time job? Whats the best way to go about this?

If i decide to make this a business would i be liable to pay council tax if i claim im not living in it? Also do i need to pay 40% on profits for capital gains? Are there any other taxes i’m missing out here? I’m looking to do this full time with a 6 month buy/renovate/sell turnaround 

Simple maths.

You buy 2 50k properties - presumabely to do up and sell on.

- do you need a mortgage, if so. it's over before it's started. But assuming not and you have £150k in the bank. Your minimum level overheads are still going to cripple any profit to be made. ie solicitors fees, estate agent fees and minimum cost of materials etc.

You arent going to turn a 50k property into a 80k property with a bit of work. the low price is reflective of the area. a 15-20% increase would be the best you'd be looking for, which it not enough to cover your costs.

phoebe1989seb

AlexMac said:

Don't worry about tax as it's unlikely you'll make enough to pay CGT (at 18% on gains over the £12.3k threshold for people earning under £50k; but you knew that because you have Google, right?).

In your circumstances it might be better to buy just one house; the cheapest place in the best street/area you can afford, live in it, improve it, keep it for at least six months, and when you eventually sell, pay no tax as that doesn't apply to your primary residence... And meanwhile you've had somewhere to live, so you've not been paying rent.

I did that once; bought a wreck at auction for £67k plus fees & legals, spent £25-30k doing it up then sold three years later for £180k.  I'd been made redundant, so had planned to do most work myself, but a job came up so I used builders for the new roof, electrics, central heating,  plumbing, bathroom, new ceilings, etc. I just fiddled about (removed six bin bags of rotting pigeon carcasses and guano from the leaky loft, fitted the kitchen and did basic carpentry in my spare time). But I made more money in 3 years from the house than I did in wages from the day job!

BUT...
 And it's a big but,

That was in the crazy late 1990's and early 'noughties, when in my area of London at least, house price inflation was topping 15% p.a.... and that probably earned me more than the "added value" of my renovation of a dump to a des.res. 

That ain't gonna happen now; in fact it didn't happen a few years laterwith another amateur house improvement project; I almost got burned.   

I bought another wreck in a cheaper, poorer coastal town for £150k odd at the peak of the market in 2007, just before a recession and 25% house price crash. Had to spend £25k again ... Sold at £172k a few years later so a loss; although as we'd bought it as a holiday home, then let it out when things got rocky, we got out flat.

Do it now, and you might well lose money as Doozergal sez...

 Best wishes finding a proper job!

Exactly! It's very different times to when a previous owner of our house bought it for £20k (1999), sold the sandstone roof tiles to pay for the renovations and resold it (2006) for £232k!!!

oldbikebloke

AlexMac said:

Don't worry about tax as it's unlikely you'll make enough to pay CGT (at 18% on gains over the £12.3k threshold for people earning under £50k; but you knew that because you have Google, right?).

In your circumstances it might be better to buy just one house; the cheapest place in the best street/area you can afford, live in it, improve it, keep it for at least six months, and when you eventually sell, pay no tax as that doesn't apply to your primary residence... And meanwhile you've had somewhere to live, so you've not been paying rent.

I did that once; bought a wreck at auction for £67k plus fees & legals, spent £25-30k doing it up then sold three years later for £180k. 

exactly, you got away with it ONCE because no one reported you

OP has, from the outset, a clear intention to do this as a full time business. He will be trading and so subject to income tax, not CGT. His repeat pattern of buying and selling will be tracked by the Land Registry and all their sales data is reported to HMRC 

AlexMac

oldbikebloke said:

AlexMac said:

...it might be better to buy just one house; the cheapest place in the best street/area you can afford, live in it, improve it, keep it for at least six months, and when you eventually sell, pay no tax as that doesn't apply to your primary residence...I did that once; bought a wreck at auction for £67k plus fees & legals, spent £25-30k doing it up then sold three years later for £180k. 

exactly, you got away with it ONCE because no one reported you

OP has, from the outset, a clear intention to do this as a full time business. He will be trading and so subject to income tax, not CGT. His repeat pattern of buying and selling will be tracked by the Land Registry and all their sales data is reported to HMRC 

Keep yer lycra shorts on oldbikeybloke!  We're saying the same thing.. 

I bought MYSELF a house to live in...(the clue's in the words "primary residence" above) did it up, and sold it three years on... to buy another primary residence (this time with my new wife ) .  And I suggested the OP do the same rather than getting into an under-capitalised property development business without experience in a time when property values are probably falling a bit.

Which strikes me as legal in this country (although as a former Trot, I really ought to believe in the old Lefty adage that "property is theft", and that it's indecent for someone like me to have made 80 grand merely for living in a gaff for three years, doing a bit of carpentry and shovelling a bit of guano)?

So no-one had to grass me up to the SHHWPP (Self Help and Hard Work Prevention Police) cos there is no tax on yer own home...even though what I did was arguably unfair ...

But then life ain't fair in this country. For example don't tell the OP, (who's obviously desperate to fulfil an entirely reasonable but likely to be unfulfilled dream to make money from affordable property)  that I'm old enough to remember much easier times:-

-- when the Regional Council (anyone recall the GLC?) gave poor kids like me 100% mortgages to buy wrecks in rough areas (an unbeleivable £10k for a 4-bedder in Brixton in 1975), 
-- and when the local Council then doled out "Home Improvement Grants" for me to add stuff like a roof and central heating (the real gas c/h, not like in my parents' Council flat, where "central heating" was the place's one coal fire in the sitting room), 
-- and when the Conservative Thatcher Government was so keen on a "property-owning democracy" that, in addition to flogging off the decent Council homes, they incentivised purchasing on the open market through tax-breaks.  She gave me MIRAS (Mortgage Interest) tax relief on the interest element of an owner-occupier's home loan; which bizarrely totalled £11k cash-back over the 5 years I owned my second house bought for (an almost eqaully unbelievable) £34k in SE London in 1985

Don't tell the Millennials or Generation Zero (like my adult grand daughter ) who will never be able to afford to buy their own homes.. or there would be a revolution...

Now there's an idea!