Q: I am an investor of properties, I buy to let and I now wish to buy and sell properties. Please advise as to the best way of doing this which allows for me to keep most of the profits.
Sep 27 2010
Answered by: Chas Roy-Chowdhury Ask a question
If you start buying properties specifically to sell them, you will be trading in properties. HM Revenue & Customs will tax you on the activity as trading income, as opposed to the situation where you might previously have sold a letting property, which gives rise to a capital gain. Exactly how the income is taxed will depend on whether you are operating through a limited company or trading on your own account but you will broadly use the sale proceeds as turnover of the trade, with cost of buying and renovating as cost of sales and presumably an element of overhead.
As a sole trader, you would pay tax and National Insurance on profits at your marginal rate (which could well exceed 50 per cent of the income if you are doing well) whereas a company would pay tax at somewhere between 21 per cent and 28 per cent. Bear in mind though that there would be more tax to pay when you pay the income out of the company as salary or dividend. Given the sums you are likely to be talking about, this is a situation where there is no substitute for paying a qualified adviser to guide you through the maze that is UK tax law, based on your particular circumstances.
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