Flipping Houses - Taxation?
Discussion
In an effort to stay busy, a friend and I have decided we will buy a snotty house, do it up and sell it at hopefully reasonable profit. He's providing the know-how, I'm providing the house.
Cash is available from immediate access savings that return less than 1 percent interest, so there's no real loss in that regard, but what I don't know is how best to buy and sell the properties from a tax perspective. We're initially looking at properties up to, say, £250,000 or so and will probably start with just the one as a practice run. Let's assume we can make 10-15% profit in terms of numbers.
I have a limited company of which I am director, though I haven't actually taken anything out of it as a wage for a while, so essentially my taxable earnings this year as an individual are virtually zero. From a tax perspective, am I better buying and selling the properties through the company or as an individual making a private purchase and sale?
Timescales should be two or three months from point of purchase to back on sale, all being well.
This is a feeler for ten and obviously I will involve my accountant when we get to doing anything, I just need to work out whether it's actually worthwhile in the first place.
Thanks.
ETA: Once the interest lost is repaid to the bank, profit is split 50/50.
Cash is available from immediate access savings that return less than 1 percent interest, so there's no real loss in that regard, but what I don't know is how best to buy and sell the properties from a tax perspective. We're initially looking at properties up to, say, £250,000 or so and will probably start with just the one as a practice run. Let's assume we can make 10-15% profit in terms of numbers.
I have a limited company of which I am director, though I haven't actually taken anything out of it as a wage for a while, so essentially my taxable earnings this year as an individual are virtually zero. From a tax perspective, am I better buying and selling the properties through the company or as an individual making a private purchase and sale?
Timescales should be two or three months from point of purchase to back on sale, all being well.
This is a feeler for ten and obviously I will involve my accountant when we get to doing anything, I just need to work out whether it's actually worthwhile in the first place.
Thanks.
ETA: Once the interest lost is repaid to the bank, profit is split 50/50.
Edited by Baldchap on Sunday 26th July 13:52
GR_TVR said:
Countdown said:
Just to mention one thing - I don't think you can sell a house within 6 months of buying it.
You can - the buyer will just be limited on which mortgage company they are able to get a mortgage with until 6 months have elapsed, but there are options.Countdown said:
That's interesting. Looks to me that it's more about preventing remortgaging something you just bought. I'd be interested to know how large an impact this has on a buyer's ability to purchase in the real world. Are lenders genuinely refusing mortgages?Baldchap said:
Countdown said:
That's interesting. Looks to me that it's more about preventing remortgaging something you just bought. I'd be interested to know how large an impact this has on a buyer's ability to purchase in the real world. Are lenders genuinely refusing mortgages?Baldchap said:
Countdown said:
That's interesting. Looks to me that it's more about preventing remortgaging something you just bought. I'd be interested to know how large an impact this has on a buyer's ability to purchase in the real world. Are lenders genuinely refusing mortgages?i was looking to buy a BTL back in January. The previous owner had inherited it when his dad passed away and the property was put into his name on 21st December. I was informed by my Solicitor that the Bank wouldn't lend on it for 6 months resulting in the sale being delayed (until 21st June). Also the 6 month waiting time meant that the mortgage offer we had received would expire so we would have to apply again.
You have a CGT allowance each every tax year (currently £12,300) so if you make 10% between you, neither of you will have to pay tax unless you have used up any of the allowance for other stuff this year of course.
You can make quite a few deductions too to assess the fiscal gain.
You can make quite a few deductions too to assess the fiscal gain.
Edited by nickfrog on Sunday 26th July 18:39
98elise said:
Also factor in that everything costs double what you think, takes twice as long as you think, and uncovers extra things that need doing.
I guess it depends on who's doing it - I keep seeing refurbed houses near us (West Cheshire) and looking at the transformation, plus what they paid and how long ago it was (typically seems to be 2yrs), and I can't see how many of them make sense. Indeed neighbours of ours had planning etc for an extension, then an identical house came up with the work, plus a bit more, that they were looking at already done. Price difference was £85K and they'd been looking at quotes of £120K.Sheepshanks said:
98elise said:
Also factor in that everything costs double what you think, takes twice as long as you think, and uncovers extra things that need doing.
I guess it depends on who's doing it - I keep seeing refurbed houses near us (West Cheshire) and looking at the transformation, plus what they paid and how long ago it was (typically seems to be 2yrs), and I can't see how many of them make sense. Indeed neighbours of ours had planning etc for an extension, then an identical house came up with the work, plus a bit more, that they were looking at already done. Price difference was £85K and they'd been looking at quotes of £120K.But with a bit of patience and luck (or a friendly estate agent friend
) you do see the odd project (usually a seemingly run down property that needs 25%+ of its value spent on the renovation) yielding close to 8% profit. We have done a couple over the past few years. And to be fair the CGT allowance constraint is often going to coincide with that anyway. As for things costing double well that only happens when you don't know what they cost.
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