Capital Gains on flip and reinvestment

Hi Dennis

Thank you for your kind words and endorsements of the companies we have partnered with. I am delighted that you are happy with our recommendations.

I don’t think you are going to like my answer to your question I’m afraid, sorry, please don’t shoot the messenger!

There is no CGT rollover relief on the type of deal that you have done. What’s worse, if you’ve never let the property out either then your profits will be taxed as a trade and not as capital gains. This also means that you will not be able to use your annual CGT exemptions.

This is a classic example of why I recommend the use of a qualified accountant specialising in advising property people. If you had run this deal past such an accountant before you embarked upon the initial purchase they might have been able to structure the ownership more tax effectively for you. The general rule is investments go into your own name and development/refurb deals for re-sale as opposed to letting should be done within a company structure.

Given the timescales and that you’ve already exchanged contracts I suspect you have made your bed and will have to lay in it now in regards to this particular deal. For the future though, here’s a link to the member profile of the accountant that advises me >>> https://www.property118.com/member/?id=452
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I was told some time ago that as long as it went straight into another investment then u do not pay tax….However this was some time ago so not sure if this has changed. There is also some kind of tax benefits if you had used the house as your main residence for X amount of yrs you don’t pay as much, I would also appreciate it if anyone can confirm that as well

Reply to the comment left by “sharon underwood” at “25/01/2015 – 09:58“:

Hi Sharon

CGT rollover relief has never applied to residential property. Perhaps you are confusing this with commercial investments, e.g. if the property was an office, shop, factory etc. where CGT rollover is applicable? The extension of CGT rollover relief to residential property is something I’ve been campaigning for for some time.

If you have ever lived in the property there’s some better news, albeit with tight and relatively complex rules – see >>> https://www.property118.com/capital-gains-tax-relief-on-a-property-you-have-lived-in/
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If this was your main residence then no cgt is due otherwise your due cgt but it depends who owned it ie how many on the deeds

Reply to the comment left by “Simon ” at “26/01/2015 – 18:36“:

Not necessarily true simon, if it was never rented then it was not an investment property and CGT is not applicable, HOWEVER income tax is payable on the profits instead.
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Hi there,
I hope this is the correct place to leave a comment.
I’m looking for some advice.
I bought my current main residence 14 months ago. In this time I’ve carried out extensive renovations, increasing the value of the house significantly. I’m hoping to remortgage in October this year to release around 30k, to buy a small flat or further renovation project to turnaround in a few months, then sell to make some further profit.
Would this proposed profit on the flat be taxable, and if so is there an idea of how much tax would be liable? Roughly speaking, I was hoping to buy something around 30k and sell at around 45k following renovations.
Many thanks.

Hello Mark, you mentioned that profits are taxable as far as I know nothing is taxable when a main residence is sold except as you pointed out in another enquiry if it is sold after 1.5 years of absence (used to be 3 years). I think this is what makes the UK unique and has driven up house prices over the years, where else can you make tax free money legally ?

Reply to the comment left by “Chris Law” at “26/01/2015 – 20:31“:

Hi Chris

Thank you for posting your question, it is very similar to the scenario first posted.

Good news is that CGT will NOT apply to your own and neither will any other form of tax on the profit you have made.

With regards to your next project though, on the basis proposed you WILL need to pay income tax on the profits by adding the profit to your taxable income and paying tax and the applicable rate. However, if you let the property for at least 6 months before selling it then any profits will be taxed as an investment and you will pay CGT on profits, less your annual CGT exemption allowance.
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Reply to the comment left by “Simon ” at “27/01/2015 – 04:57“:

Hi Simon

Dennis is not selling his main residence though.

Apart from that I concur with your comments.
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Reply to the comment left by “Mark Alexander” at “27/01/2015 – 09:12“:

Hi there,
Many thanks for that.
If I were housed in a rental, then only owning the next ongoing project which wouldn’t be mortgaged, would this then mean any new profit raised from the property would not be taxable?
Thanks.
Chris