How much tax would I pay on property sales as a small-scale developer?

I am going to start buying and developing properties to sell when they are refurbished. How will property tax affect me if I do this in my own name or set up a company?

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Question: I am going to start developing properties. I do not intend to let or keep them for long-term appreciation, but I want to sell when refurbishment is complete to try to make a profit. I am unsure whether it is best to do this in my name or set up a company, as I do not know enough about property tax — what taxes would be payable?
Answer: The tax that will be due depends on whether the activities you are undertaking are trading or investment in nature. HMRC will look at the original intention and the circumstances to determine this. Generally, if properties are acquired with the intention of renting them out, such activity amounts to investment and the properties will be capital assets.
On any sale, a capital gain will be realised, taxable under capital gains tax if owned by an individual, or corporation tax if owned by a company. Any rental income will be subject to income tax or corporation tax for a company, but deductions can be made from this, for example the cost of interest on borrowing.
However, if properties are acquired with a view to redeveloping then selling them at a gain, which appears to be your intention, they will be treated as trading stock. Any profit on the sales will be trading income, subject to income tax for you as an individual and corporation tax for a company.
Please note that for a company, gains and income are taxable at the same rate, but the profits are calculated in different ways. Do discuss these options in more detail with your accountant.
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If you have a question for Fiona McNulty, please email or write to Legal Solutions, Homes & Property, London Evening Standard, 2 Derry Street, W8 5EE. We regret that questions cannot be answered individually but we will try to feature them here. Fiona is legal director in the real estate group of Foot Anstey LLP in Exeter (
These answers can only be a very brief commentary on the issues raised and should not be relied on as legal advice. No liability is accepted for such reliance. If you have similar issues, you should obtain advice from a solicitor.

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