New business - Property Trading. Need clarity of some tax
Discussion
Hi everyone
Wondering if someone could help clear up some tax related questions please related to property trading.
My partner has a house she bought just over a year ago that she was renting out but has now decided to sell. She intends to carry on running her sole trader (non house related) business part time and use the profits from selling the house (prices went up and she made some improvements/will make some more) to purchase another house, renovate and sell on etc.
We understand that a LTD company is probably the best way to go for taxation purposes (long term) - although I suppose it depends on how many properties she does a year plus her income for her sole trader business, which is low at approx 3-5K per year.
Can you claim for more expenses related to a property trader business as a LTD company than as a sole trader? I believe you can only deduct expenses for 'improvements' and not 'replacements' - does it make any difference if you're doing as an LTD?
The property at the moment is in her name. If she wanted to sell as a LTD company then I believe she would have to transfer it to that LTD company which is effectively a sale - i.e. stamp duty and CGT would become effective. Is that right? If so it wouldn't make any sense to that with this house I guess.
Thanks
Ross
Wondering if someone could help clear up some tax related questions please related to property trading.
My partner has a house she bought just over a year ago that she was renting out but has now decided to sell. She intends to carry on running her sole trader (non house related) business part time and use the profits from selling the house (prices went up and she made some improvements/will make some more) to purchase another house, renovate and sell on etc.
We understand that a LTD company is probably the best way to go for taxation purposes (long term) - although I suppose it depends on how many properties she does a year plus her income for her sole trader business, which is low at approx 3-5K per year.
Can you claim for more expenses related to a property trader business as a LTD company than as a sole trader? I believe you can only deduct expenses for 'improvements' and not 'replacements' - does it make any difference if you're doing as an LTD?
The property at the moment is in her name. If she wanted to sell as a LTD company then I believe she would have to transfer it to that LTD company which is effectively a sale - i.e. stamp duty and CGT would become effective. Is that right? If so it wouldn't make any sense to that with this house I guess.
Thanks
Ross
Thanks everyone, some helpful info there.
Chris, this is a house she bought as an investment, she's never lived in it. She lives with me. So living in the houses isn't an option.
Having done some more reading it looks like as she rented that house out, rather that with the intent to buy & sell as a business, that she would have to pay CGT when selling it? Whereas any future ones she buys (personally/sole trader) and sells, without ever renting out, i.e. as a "property trader", that would be taxed as income through self assessment, and not CGT. Is that right?
Chris, this is a house she bought as an investment, she's never lived in it. She lives with me. So living in the houses isn't an option.
Having done some more reading it looks like as she rented that house out, rather that with the intent to buy & sell as a business, that she would have to pay CGT when selling it? Whereas any future ones she buys (personally/sole trader) and sells, without ever renting out, i.e. as a "property trader", that would be taxed as income through self assessment, and not CGT. Is that right?
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