X
X
The monthly magazine providing news analysis and professional research for the discerning private investor/landlord

Crossing Over

The businesses of property investment and property development are closely intertwined but the tax treatment of these two businesses is vastly different. Carl Bayley, looks at the rather fuzzy boundary between investment and development - and what happens

In the real world most property investors aim to get the best return on their investments. Many of the best investors take a flexible approach: holding some property for long-term rental and selling other properties on in order to achieve better returns, improve cashflow, or to release funds for other investments.

In a sensible world, all these activities would be regarded as a single business. The investor is merely trying to achieve the best results with the assets and funds available.

For tax purposes, however, long-term investments and short-term developments have to be regarded as two different businesses - and the tax treatment of these businesses is very different!

Investment
When properties are held as long-term investments, they are regarded as capital assets. For individual investors, the rental profits are subject to Income Tax but any profit on disposal of the property is regarded as a capital gain and is subject to much lower rates of tax - generally 18% or 28%, with an exemption for the first £10,900.

Want the full article?

subscribe