General (main property discussion here) - Capital Gains Tax

If I were to buy a piece of land for (say) £100k, build on it at a cost of (say) £200k and then sell the resultant property for (say) £500k, the whole cycle taking (say) 12 months, would I have to pay CGT and how much? Advice appreciated! Thanks

live in it for six months then there is no CGT.

Are you able to do that with any property Alex? Would the inland revenue get suspicious say if I lived in every property I own? Just a thought.

Cheers

Simon

you cant do that, has implications on your ppr and future cgt, have to look at each individual case and finances and asses. go and see an accountant with a tax quailification ATTI.

Get real tax advice - living in a property for 6 months does not mitigate cgt!

I guess in the event of property being your PPR, the advice is correct you would be exempt tax. I think you can do the 6 month thing BUT the IR are not stupid and would penalise you if 'they' felt you were taking advantage.

In the event of the property being an investment, CGT due would be payable on the uplift (200k) depending on the time you retained the property, the deciding factor being a thing called 'Taper Relief'. This kicks in only after 3 full tax years of ownership and reduces the liable tax rate (assuming upper limit of 40%) over the remaining 7 years to a more amenable 24% (after 10 full tax years of ownership). Also, each of us (including spouses have an annual CG Allowance of (not sure value for 2006/2007) but approx 9k thus 18k for a couple or civil partnership.

However, thing to watch out for is if assessed by IR as a Property Trader as opposed to Property Investor. The previous case only applies to a Property Investor, i.e. someone who holds onto property for the long term. If you buy and sell property as a living you will be classed as a trader and thus the gain will be assessed as Income as opposed to Capital Gains, so no taper relief, or CG allowance it would be taxed at the most appropriate band (possibly 40%) applicable to you and your partner AS well as being liable for National Insurance to boot.

Actually it is all VERY well explained (source of my knowledge) in 'How to avoid Property Tax' by the very knowledgable (no relation) Carl Bayley BSc ACA. Check out taxcafe.co.uk. I can recomend the tax stuff!

david, superb explanation. thanks as this is really useful.

is there some way to link threads. cos there are other CGT threads where this is the answer.

tom

Thanks Tom,

not sure how to link though!!

David