Flipping property or BTL?

_Penny_Dreadful

Bigphil1474 said:

Penny - There's no income tax on selling your own property. Being the principal residence is relevant, as you don't pay any capital gains tax on your main residence.

When you buy properties to renovate and flip the applicable tax is income tax.  House flipping is not seen by HMRC as an investment but property trading, hence the income tax. 

hyundai2005

_Penny_Dreadful said:

hyundai2005 said:

MultiFuelBurner said:

You say you work 30 hours with plenty of overtime.

Realistically how many hours can you put in evenings and weekend and still enjoy the life of an 18 year old?

Thanks for replying. Without working OT i have 4 days off a week usually doing nothing. Should probably go find some fun though 

When you buy property to renovate and sell the applicable tax on your profits is incomes tax.  The property being your principal residence does't come into it.

Other than general HPI to increase the value of a property you need to increase the size of the property e.g. with an extension, or buying a property no mortgage lender will touch for cash and sorting whatever it is that needs sorting to allow lenders to use it as security e.g. sorting subsidence.  It's not just a case of installing a new kitchen and slapping some paint on the walls.

Hi Penny, If one were to buy, move in renovate etc and decides a year later they don't like it for whatever reason and sell for a profit vs someone who came and flipped it a year later at a profit.

How does HMRC quantify who is eligible for PPR since both their scenarios are basically the same?

I have heard some people advise waiting 12-16 months before selling to help fall under PPR but it seems like a grey area.

Thanks

ProDave

hyundai2005 said:

_Penny_Dreadful said:

hyundai2005 said:

MultiFuelBurner said:

You say you work 30 hours with plenty of overtime.

Realistically how many hours can you put in evenings and weekend and still enjoy the life of an 18 year old?

Thanks for replying. Without working OT i have 4 days off a week usually doing nothing. Should probably go find some fun though 

When you buy property to renovate and sell the applicable tax on your profits is incomes tax.  The property being your principal residence does't come into it.

Other than general HPI to increase the value of a property you need to increase the size of the property e.g. with an extension, or buying a property no mortgage lender will touch for cash and sorting whatever it is that needs sorting to allow lenders to use it as security e.g. sorting subsidence.  It's not just a case of installing a new kitchen and slapping some paint on the walls.

Hi Penny, If one were to buy, move in renovate etc and decides a year later they don't like it for whatever reason and sell for a profit vs someone who came and flipped it a year later at a profit.

How does HMRC quantify who is eligible for PPR since both their scenarios are basically the same?

If you do this several times, and HMRC notice, you may well end up in court to justify to them that you really are just improving your own home then moving on, vs operating a property renovation business.

_Penny_Dreadful

hyundai2005 said:

_Penny_Dreadful said:

hyundai2005 said:

MultiFuelBurner said:

You say you work 30 hours with plenty of overtime.

Realistically how many hours can you put in evenings and weekend and still enjoy the life of an 18 year old?

Thanks for replying. Without working OT i have 4 days off a week usually doing nothing. Should probably go find some fun though 

When you buy property to renovate and sell the applicable tax on your profits is incomes tax.  The property being your principal residence does't come into it.

Other than general HPI to increase the value of a property you need to increase the size of the property e.g. with an extension, or buying a property no mortgage lender will touch for cash and sorting whatever it is that needs sorting to allow lenders to use it as security e.g. sorting subsidence.  It's not just a case of installing a new kitchen and slapping some paint on the walls.

Hi Penny, If one were to buy, move in renovate etc and decides a year later they don't like it for whatever reason and sell for a profit vs someone who came and flipped it a year later at a profit.

How does HMRC quantify who is eligible for PPR since both their scenarios are basically the same?

I have heard some people advise waiting 12-16 months before selling to help fall under PPR but it seems like a grey area.

Thanks

PPR is to do with CGT, not income tax. The income tax based on your trading activities is based on self assessment. It’s up to you to ensure you report your income correctly to HMRC. 

km1500

if you flip once it's not a problem.

if you do.it multiple times over a short period you should consider if it is a business or not.

BJV

OP - No. We don't have any debt on the houses. We started as a way to invest profit from our business and it grew and grew from there. At present we are currently in the process of decorating one. Second fix on another, ready for the first fix on a third and rip out on another so sort of know what we are doing and what works. 

We are very lucky we do go over the top with the renovations, and we charge the going rate when the tenant moves in. We know we won't have to touch the house ( except for maintenance for at least 6-10 years). We have just left it like that. Also, we think right or wrong that now is not the time to increase rents. Everyone is struggling. After experiencing a taste of what it is like to have a bad tenant, we decided that we would rather have slightly less and a good tenant who respects the property and pays on time than the other way around. Also, an increase of a couple of pounds may mean that some can not pay. Nightmare and thank fully it is something that, as of yet, we have never had.

Our tenants like and we do. So it works for everyone. It may not sound like bad business sense, but honestly, after having the nightmare of one lousy tenant, it is worth the extra couple of pounds. I would not wish a bad tenant on my worst enemy.

BJV

OP, please also remember that some mortgage companies don't like to lend on a property already sold within set time limits. I have never done it, but I know someone who bought a house that had been flipped. They did a good job, but their mortgage company would not lend because it was sold within, I think, 6 months ????, and they had to find another mortgage comany.

hyundai2005

_Penny_Dreadful said:

hyundai2005 said:

_Penny_Dreadful said:

hyundai2005 said:

MultiFuelBurner said:

You say you work 30 hours with plenty of overtime.

Realistically how many hours can you put in evenings and weekend and still enjoy the life of an 18 year old?

Thanks for replying. Without working OT i have 4 days off a week usually doing nothing. Should probably go find some fun though 

When you buy property to renovate and sell the applicable tax on your profits is incomes tax.  The property being your principal residence does't come into it.

Other than general HPI to increase the value of a property you need to increase the size of the property e.g. with an extension, or buying a property no mortgage lender will touch for cash and sorting whatever it is that needs sorting to allow lenders to use it as security e.g. sorting subsidence.  It's not just a case of installing a new kitchen and slapping some paint on the walls.

Hi Penny, If one were to buy, move in renovate etc and decides a year later they don't like it for whatever reason and sell for a profit vs someone who came and flipped it a year later at a profit.

How does HMRC quantify who is eligible for PPR since both their scenarios are basically the same?

I have heard some people advise waiting 12-16 months before selling to help fall under PPR but it seems like a grey area.

Thanks

PPR is to do with CGT, not income tax. The income tax based on your trading activities is based on self assessment. It’s up to you to ensure you report your income correctly to HMRC. 

Thanks Penny

hyundai2005

km1500 said:

if you flip once it's not a problem.

if you do.it multiple times over a short period you should consider if it is a business or not.

Thanks.

Do you know what timespan to flip is generally advised as to not raise red flags?

hyundai2005

BJV said:

OP - No. We don't have any debt on the houses. We started as a way to invest profit from our business and it grew and grew from there. At present we are currently in the process of decorating one. Second fix on another, ready for the first fix on a third and rip out on another so sort of know what we are doing and what works. 

We are very lucky we do go over the top with the renovations, and we charge the going rate when the tenant moves in. We know we won't have to touch the house ( except for maintenance for at least 6-10 years). We have just left it like that. Also, we think right or wrong that now is not the time to increase rents. Everyone is struggling. After experiencing a taste of what it is like to have a bad tenant, we decided that we would rather have slightly less and a good tenant who respects the property and pays on time than the other way around. Also, an increase of a couple of pounds may mean that some can not pay. Nightmare and thank fully it is something that, as of yet, we have never had.

Our tenants like and we do. So it works for everyone. It may not sound like bad business sense, but honestly, after having the nightmare of one lousy tenant, it is worth the extra couple of pounds. I would not wish a bad tenant on my worst enemy.

Ah got it thanks. Will keep in mind.

That sounds like a good way to keep everyone happy. I guess in your situation it is less pressure financially to keep the rent down too since you don't have to deal with mortgages or rising interest rates. I'm glad BTL is going well for you. 

Thank you very much for the replies