We Flipped This House & Made £100,000 Profit

In a recent YouTube video I checked out one of my students' properties that they have done up and plan to flip. Darren and Ellen used permitted development rights to extent the back and transformed every inch of this house. They bought the property for £165k; the refurbishment cost £125k with an end value of £415k. The couple used investor finance to buy the property and made £115k profit. The property looks amazing and their profit is well deserved. You can see the full refurbishment in the video above.

Darren and Ellen paid zero tax on this project because they understand the law and the correct way to buy property. Although I am not a lawyer or an accountant, and this is not professional advice, I will be going over my understanding of exactly how they did it. In this article, you will learn how to profit from a property without paying a heavy tax bill!

1. How to legally avoid stamp duty

If a property is uninhabitable, you don’t need to pay the residential rate of stamp duty. What is classed as uninhabitable can be quite wide. The Bewley v HMRC (2019) decision sets out how this is determined. There are many things that make a property uninhabitable and not all of them are very hard to fix. In many circumstances, having no kitchen to not having a hot water system can qualify. If your property qualifies for this exemption, you can make a huge tax saving and in a completely legitimate way!

Make sure to seek independent legal advice before proceeding. Your lawyer or accountant may not mention this exemption to you unless you bring it to their attention yourself. Make sure they have a good understanding of this exemption and they can walk you through the implications of the Bewley v HMRC (2019) decision. Don’t be afraid to seek a second opinion if your lawyer or accountant doesn’t seem to understand the exemption or is unwilling to help you to use it.

2. How to legally avoid capital gains tax

You don’t need to pay capital gains tax on the sale of your primary residence. It is perfectly acceptable to buy a home, then do it up while living in it as your primary residence. You must go in to the trade with the genuine intent to live in the property and to do it up for you to live in. If your intent is to flip properties as part of a business you could potentially be liable for income tax.

Assuming however you do buy a property to live in and then do the property up, and you do live in the property as your main residence, you can of course sell that property as and when you want to move on. The profit you make from the sale (i.e. a capital gain) is not subject to tax. You can keep the profits and do what you like with them.

Again, it is essential that you seek professional advice before trying this for yourself. Gain an understanding of this area of law yourself and have a detailed conversation with a professional who is well versed in this topic.

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