When would tax be due

Buritonian

If I buy a fixer upper property, renovate it, and sell it, rolling all proceeds on to another project/property, do I declare the increase (less cost) from the sale of the first house in that tax year, or is profit only declarable to HMRC, when I realise the profits, by selling up the second property and banking cash? I ask this daft question because I read in Rich Dad, Poor Dad, that something like this is the case in the USA (I'm in the UK).  

Slithery

Income tax will be payable on the profit on the 1st property in the tax year that you sell it and realise the gain.

canaldumidi

And for the avoidance of doubt, it would be Income Tax as Slithery says, not Capital Gains Tax as is sometimes the case with property sales.

Buritonian

and do I have this right...? Setting aside profits from renting, if I buy a property for £125k in 2022, let it out for 20yrs, then sell it for circa £350k in 2042 (during my retirement), then CGT would be due on the increase of £225k (minus costs)? 

canaldumidi

Broadly, yes.

K_S

Buritonian said:

and do I have this right...? Setting aside profits from renting, if I buy a property for £125k in 2022, let it out for 20yrs, then sell it for circa £350k in 2042 (during my retirement), then CGT would be due on the increase of £225k (minus costs)? 

@buritonian Unless we've turned into Singapore-on-Thames by then with no CGT for landlords  

dimbo61

I Love this !
My wise Dad who is 87 watches Homes under the Hammer most mornings.
He is up by 11am 
He loves the transformation from a run down property to a love new home or Rental Investment.
However the show seems to gloss over the buying and selling costs, the Stamp duty +3%, The Council tax which is even more if the property is empty for a long time !
The planning application, Refusal, Planning appeal and costs of employing all sorts of Structural engineers, Surveyors, specialists reports and plans,  Fighting the council to alter the layout or extend the property.
Don't forget the Income Tax you have to pay if you Flip properties.
Employing the right tradespeople who are nearly all self employed so expect to pay £50/70 an hour.
Let's talk about borrowing costs and BTL lenders, rates maybe low at the moment but the fees can be eye watering. 
Are you a higher rate tax payer ? 
Limited company ?
Accounts every 3/12 months and getting all the legal obligations right for your job of being a Landlord.
EPC, EICR, GSC, Fire safety,  PAT testing , and fit for habitation.
How to rent, Right to rent, letting agents, deposit protection, paperwork for the Tenancy Pack, 
Guarantors !
Last but not least watch 
Slum Landlords and Nightmare Tenants.
Sure you don't want to pay more into your pension or the OH?
Salary sacrifice ?
ISA,s cash or stocks and shares ?

PS I forgot the Capital Gains Tax when you sell maybe at a profit or could be a loss.

propertyhunter

They say diversify if you can don't they, but I see property as more trouble than its worth these days. You're banking on capital appreciation more than anything. God knows if that's even guaranteed anymore.

You can be a millionaire by investing consistently over the long-term in an ISA and pension. 

Buritonian

Totally agree - I'm about to commit quite heavily to pension and ISA options but felt I had to ask a few questions before writing off property altogether. For me, as a newbie, property seems a LOT of work and exposure best left to those with years in the game, and particularly since no 2 people are agreed as to how house prices will increase. I'd prefer to keep my investments light touch and focus on my day job to ensure I can adhere to the plans I make. Thanks all

BikingBud

dimbo61 said:

I Love this !
My wise Dad who is 87 watches Homes under the Hammer most mornings.
He is up by 11am 
He loves the transformation from a run down property to a love new home or Rental Investment.
However the show seems to gloss over the buying and selling costs, the Stamp duty +3%, The Council tax which is even more if the property is empty for a long time !
The planning application, Refusal, Planning appeal and costs of employing all sorts of Structural engineers, Surveyors, specialists reports and plans,  Fighting the council to alter the layout or extend the property.
Don't forget the Income Tax you have to pay if you Flip properties.
Employing the right tradespeople who are nearly all self employed so expect to pay £50/70 an hour.
Let's talk about borrowing costs and BTL lenders, rates maybe low at the moment but the fees can be eye watering. 
Are you a higher rate tax payer ? 
Limited company ?
Accounts every 3/12 months and getting all the legal obligations right for your job of being a Landlord.
EPC, EICR, GSC, Fire safety,  PAT testing , and fit for habitation.
How to rent, Right to rent, letting agents, deposit protection, paperwork for the Tenancy Pack, 
Guarantors !
Last but not least watch 
Slum Landlords and Nightmare Tenants.
Sure you don't want to pay more into your pension or the OH?
Salary sacrifice ?
ISA,s cash or stocks and shares ?

PS I forgot the Capital Gains Tax when you sell maybe at a profit or could be a loss.

Oh

 You've spoilt my dream i though it was buy a wreck, slam a kitchen in, 2 quick coats of magnolia, some grey carpet, possibly some wood effect vinyl, max £1500 all done by the wizard property developer, ( quick disclaimer - no tradespeople have been employed on the fantastic upgrade to excellent finish property ) and scarper with 50% profit.

Rinse and repeat. It's just like making energy.

dimbo61

Surveyor can check on Land Registry what you paid for a property in 5 minutes.
The days of a quick paint job have gone