Jump to content

Investment property tax sell or move in?


Recommended Posts

We are currently building a house on our land alongside our existing house and was wondering if we were to let it out for holiday let for a few years how the investment property tax would be calculated. Would we have to get it professionally valued once built and then once sold would the investment property tax be calculated on the difference between the valuation once built and selling price. We were wondering as it maybe better to rent out our existing home instead as presumably the investment tax due on this once sold would only be due on the difference of the valuation at the time we rented out the property to the sale price and we would also get our vat back on the new build. Anybody had a similar situation?

Link to comment
Share on other sites

Who exactly is building the house? You or a company you own?

If the CIL has been implemented in your area what have you done about that?

 

My understanding  is...

 

If you are building it to live in yourself then you might avoid CGT because when you eventually sell it will be your Principle Private Residence. There might be CGT to pay on your current house but only on the gain since you move out (?) and there is scope to avoid that if sold within 2 (?) Years.

 

If you are building it to sell and make a profit the you might be taxed as a developer and have to pay income tax on the profit.

 

If you build and then hold it as an investment/holiday let/Air BnB you might avoid income tax on the sale profit but pay CGT when sold.

 

If you build it and let it on a long lease you can avoid income tax but loose the ability to reclaim VAT or may have to repay any VAT claimed.

 

HMRC sometimes look at your intentions at the outset so it might not be possible to change your mind later. What have you already told any lender you plan to do?

 

See also..

https://www.thisismoney.co.uk/money/experts/article-3420863/We-thinking-building-house-garden-pay-CGT-sold-it.html

 

 

 

Edited by Temp
Link to comment
Share on other sites

If you already have a property empire consider moving to a country like Belgium that doesn't have CGT. You have to be resident there for 5 years and its unwise to retain a home in the UK for the duration.

Link to comment
Share on other sites

7 hours ago, Temp said:

If you already have a property empire consider moving to a country like Belgium that doesn't have CGT. You have to be resident there for 5 years and its unwise to retain a home in the UK for the duration.

 

Is it 5 years? Wow, I thought it was only a couple. 

Link to comment
Share on other sites

On 24/03/2021 at 08:34, jack said:

 

Is it 5 years? Wow, I thought it was only a couple. 

 

Actually it looks like I'm wrong. Leaving the country might not be enough..

 

20+ years ago you could leave for a year or two. Then some chancellor made it 5 years.

 

However it looks like for property they changed it in 2015 and again in 2019..

 

https://www.hillierhopkins.co.uk/here-for-you/internationally-mobile-individuals/everything-you-need-to-know-about-non-resident-capital-gains-tax-on-uk-properties

 

Quote

Prior to the latest changes in April 2019, non-residents were liable to pay CGT on gains relating to direct disposals of residential property only. This meant the sale of non-residential property, as well as any indirect sales (which we’ll discuss in greater detail below), were largely exempt from CGT for non-residents.

 

These rules were based on NRCGT policy that was implemented on the 6th of April 2015. Before that, non-residents disposing of any UK land or property were largely exempt from CGT.

Link to comment
Share on other sites

Thanks very much ..we are building our house ourselves, we just wonder how capital gain tax is worked out if we rented out the property for a few years then sold ..l guess it’s the value of the land and cost of the build minus the sale price which then leaves a profit which then would be subject to capital gains tax.

Link to comment
Share on other sites

  • 2 years later...

were in the process of building 2 properties on a plot the plan is to move in to one and let the other out ,how does this affect the zero rating of the builds if indeed it does and are there any measures we can take before we start ? maybe delay the building of the second one ?

Link to comment
Share on other sites

10 hours ago, steady said:

were in the process of building 2 properties on a plot the plan is to move in to one and let the other out ,how does this affect the zero rating of the builds if indeed it does and are there any measures we can take before we start ? maybe delay the building of the second one ?

I had a similar situation although the 2nd property was to sell not let.  My solution was set up a VAT registered limited company to build the 2nd one so I could reclaim the VAT on materials & other expenses.  The 1st property was for us to live in so usual self build rules applied.  It was a bit complicated to keep all the invoices etc separate but not a major issue.  I did employ a good accountant & HMRC were fine with the arrangement.

 

In building terms I did the groundworks & foundations simultaneously (making sure the contractors invoiced for 2 separate jobs - 1 zero rated to me & 1 with VAT to my company).  Then I completed my self build & moved in before completing the 2nd property (which went under offer before 2nd fix had been done).

  • Like 2
Link to comment
Share on other sites

My understanding is that if you build then let out a house it's not eligible for zero rating. It something to do with the subtle difference between zero rating and exempt.

 

Even if it could be zero rated I don't think you can use the self build reclaim scheme to recover the VAT on that house. See comment by @shuff27

 

 

 

  • Like 1
Link to comment
Share on other sites

Can’t husband wife build the houses “ individually “ and claim self build each ? . Or be in the action of “ splitting up “ - did this many years ago to get a better mortgage deal …

Link to comment
Share on other sites

2 hours ago, Pocster said:

Can’t husband wife build the houses “ individually “ and claim self build each ? . Or be in the action of “ splitting up “ - did this many years ago to get a better mortgage deal …

 

Only if they can convince the Vat man they are living in separate houses. Ditto for the CIL.

 

Got any other relatives?

 

 

  • Like 1
Link to comment
Share on other sites

4 minutes ago, Temp said:

 

Only if they can convince the Vat man they are living in separate houses. Ditto for the CIL.

 

Got any other relatives?

 

 

Could possibly be worth renting something - having all the bills there in wife’s/ husbands name . If the VAT outweighs the rental costs .

What a tangled web we weave when we first deceive.

 

Link to comment
Share on other sites

Create an account or sign in to comment

You need to be a member in order to leave a comment

Create an account

Sign up for a new account in our community. It's easy!

Register a new account

Sign in

Already have an account? Sign in here.

Sign In Now
×
×
  • Create New...