Using home equity to invest in new build

[Timmusdavies]

Hi

We have sold our main house but have just been gazumped on our new property. As there is no place adequate where we want to live, we have decided to rent and use equity the sale of our house to probably buy plots and build new houses, for a couple of years to increase our equity that way. My question is would we have to pay tax on the (hopeful) earnings of each house we build and sell, and if so, how much.

Many thanks

Tim

 

[Michelle Barringer]

yes you would - and you need to find an accountant to advise you on the level and the best way deal with this - as your personal circumstances will dictate this

 

[Luke Masters]

@Timmusdavies As you won't have another property you own, as long as you are prepared to have each property for around 1 year. If you register it as your primary residence and redirect post and bank accounts there to reinforce it is your primary residence, you will be eligible for Private Residence Relief.

In which case you will not pay capital gains tax, please ensure you speak to a tax specialist and accountant as that is a very short version of the truth.

 

[Nicholas Wallwork]

As Luke says if you only own one at a time and do the developments in series you should be able to claim the private residence relief...

If you do more than one at a time then you'll need a tax efficient structure depending on your exit strategy. This is where the accountants come in as depending on your exact goals, sales volume etc you will need different structures. One reason for this is the potential ability to claim entrepreneurs relief (10% at present I believe) if you sell on in certain circumstances, as well as using your (and potentially your spouses) capital gains allowances effectively in other circumstances...

Hopefully at least we have pointed you in the right direction... Getting the correct accountacy advice BEFORE you buy is essential though...

Good luck either way and hopefully we'll hear more soon!