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Does flipping houses avoid Capital Gains Tax (UK)?

  • 3 min read
  • 7 Oct 2022
Does flipping houses avoid Capital Gains Tax (UK)

What the flip is house flipping and does flipping houses avoid Capital Gains Tax in the UK? If you’re asking this question, you’ve come to the right place. We’d love to share!

House flipping (buying and selling a house for a profit) is definitely on the rise, but to avoid making your house flip a flop, you’ll need to get to grips with any potential tax implications.

Whether you’re flipping houses for a living or looking to make a bit of extra cash on the side, here’s everything you need to know about Capital Gains Tax and flipping houses in the UK.

Is house flipping worth it? 

Property flipping has experienced a huge boom since the start of the pandemic. Property flippers have taken to platforms like TikTok to showcase their renovations, offering advice for first-time flippers. 

Around 23,000 homes across England and Wales were flipped in 2020.

But the question is, is it really worth it?

That’s a question only you can answer. It’s worth thinking about the cost of renovating, how long it will take you and, of course, what taxes you’ll need to pay.

Understanding your tax responsibilities when it comes to flipping houses is the first step on your property flipping journey –  and we can offer some guidance along the way.

So, does flipping houses avoid capital gains tax (UK)?

Capital Gains Tax (CGT) is a tax you’ll pay when you sell an asset for a profit, such as property, shares or cryptocurrency.

HMRC doesn’t consider house flips an investment, so you won’t need to pay Capital Gains Tax when flipping houses and selling them on for a profit. However, there are other taxes to consider.

You’ll also need to think about whether you’re selling it or renting it out – as rentals might be subject to CGT.

You’ll likely pay Income Tax instead

If you’re self-employed and flipping houses (or thinking about it), you’ll pay Income Tax as an individual rather than Capital Gains Tax.

As we touched on above, property flipping isn’t considered an investment, so you’ll just pay Income Tax through your Self Assessment.

How to calculate Income Tax

Use our handy Income Tax calculator to see how much Income Tax you’ll need to pay on your house flip. 

You won’t need to pay this until you file your Self Assessment, but calculating any tax now will give you a better idea of any profits from your house flip.

Your situation

Outlined number oneImage of an arrow
I am
Annual self-employed income
Self-employed expenses

Tax and profit

Outlined number two
  • Total earnings
    £1,000 tax-free Trading Allowance
  • Tax to pay
    £7,286 income tax
    £0 class 2 National Insurance
    £2,186 class 4 National Insurance
  • What you’re left with

How your income tax is calculated

When you’re self-employed, you have to pay your income tax and national insurance contributions yourself in your annual Self Assessment. Our calculator helps you quickly assess how much you owe.

However you may be eligible for a tax refund when:

  1. You already made tax payments for the year but your annual income ended up less than planned
  2. You have done things that qualify for a tax relief (made private pension contributions, given to charity, etc.)

In your case when you earn £50,000:

Income tax breakdown

You pay no income tax on first £12,570 that you make

You pay £7,286 at basic income tax rate (20%) on the next £36,430

National insurance contributions breakdown

No contributions on the first £12,570 that you make

You pay £2,186 in contributions (at 6%) on the next £36,430 that you make

You pay £0 in NI Class 2 contributions

Tax bill amount £9,472
I want to pay by
Savings frequency

You need to save

£14.22 per day

to pay your £9,471.56 tax bill by 31/1/2026 which is in 666 days

What about Corporation Tax?

If you’re flipping houses through a Limited Company, you’ll need to pay Corporation Tax instead. This is a tax paid by businesses based on their yearly profits.

The rate you’ll pay depends on your profits.

  • If your business makes £50,000 or more, you’ll pay 25%
  • If you make less than this, you’ll pay 19%

What if I’m planning on renting the property to tenants?

Good question – this is where things get a little more complicated, but we can break it down for you.

Letting a property to tenants is treated differently than selling when it comes to tax. If you’re thinking about flipping a house and then renting it out, you’ll need to pay Capital Gains Tax at​​ the basic rate of 18%. Or, if you’re a higher-rate taxpayer, you’ll pay an increased CGT rate of 24%.

Sounds complicated, right? Don’t worry, you can use our Capital Gains Tax calculator to help simplify things.

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