CGT or Personal Taxation On Flipped property ???

[jamandco]

Hi All

I read that if I buy a property for investment and rent it out for X number of years, CGT only becomes payable if and when I sell, is that right so far?....

I've also recently learned that if when I buy property, I was to place it within a Ltd company, and made it very clear to the tax man that I intended to sell the property and NOT to rent it out, that I would then only pay tax on the profit from the sale, and not any CGT, can anyone say if this information sounds correct and what would be the level of taxation in this scenario?

Many thanks all

Michael

[odecar]

Hi All

I read that if I buy a property for investment and rent it out for X number of years, CGT only becomes payable if and when I sell, is that right so far?....

I've also recently learned that if when I buy property, I was to place it within a Ltd company, and made it very clear to the tax man that I intended to sell the property and NOT to rent it out, that I would then only pay tax on the profit from the sale, and not any CGT, can anyone say if this information sounds correct and what would be the level of taxation in this scenario?

Many thanks all

Michael

Think Capital Gains won't apply as you are trading i.e.buying to sell.

[plym77]

Be careful with this...

If you buy a property with a view to making a profit, rather than investment, this is a trade not a gain.

CGT - annual exemptions available, other reliefs available and potential to defer/mitigate tax liabilities. CGT is now only at 18% - particularly useful if you would be a higher rate tax payer when selling the property (as even with full taper under old rules the effective rate of tax would be 24%)

Trade - if you are self-employed (ie outside a limited company) there could be costs which you wouldnt get if it was CGT, but, tax would be paid based on your effective rate of tax - could be 40%. Plus Class 4 National Insurance could be payable - 1% or 8% depending on your circumstances. Class 2 NIC could also be payable - although this is minimal.

Ltd Co - If you are trading then this could be a better option than self-employment. This is because you can potentially control the higher rate tax on extraction of capital from the company. It would depend on your other income, need for the profits etc. Limited companys can be the answer, but not always as it can lead to double taxation - it really depends on the situation and your needs. Advice should always be sought before taking this route. However Ltd Co's are less favourable if this is a CGT rather than trade thing due to double taxation.

And do remember - it really is matter of fact. If you are buying, doing up and selling, it is a trade, if you are buying and renting it out then this is more likely rental income and CGT (but not always!).

Before you embark on this, speak to a professional tax adviser.

Best wishes

Sherena

[simhar]

Spot on Sherena!