I’m not a homeowner, but looking to purchase – either residential, BTL or to buy a derelict property and flip.
I have a limited company with a turnover circa £200K and projected to double that in the next year. I have no personal debts or defaults and a good credit rating.
I’m entrepreneurial, confident I can flip properties, and would like some guidance in funding purchases. I’ve heard bridging finance, but don’t know if it’s the right strategy for me.
You have several potential options:
Advantages: no tax (CGT or income) payable on the profits
Advantage: lower income requirement needed than for a main res mortgage
If you don’t have that much cash you need to find private individuals who do and are prepared to lend it to you
The only way to avoid paying tax of some sort on a flip is to use your main residence as the property to flip. Otherwise you will pay tax on your profits, as any business venture does, but what tax is payable?
The common assumption is you pay Capital Gains Tax (CGT) on a flip, but this is wrong, you don’t.
CGT is triggered by the disposal of an asset held over the medium to long-term
A flip is usually bought and sold in around 12 months or less. HMRC consider this trading in the same way that buying and selling cars, baked beans or any other commodity is trading, so it is subject to income tax, not CGT, or Corporation Tax if you buy and sell using a limited company structure.