Today’s show was inspired by a listener who dropped me a line asking to clear up how property profits are taxed. It is a commonly held belief that all property gains or profits on sale are taxed according to capital gains tax. However, is that strictly correct? Another commonly held belief is that of property prices doubling every ten years – is that true or is it a myth? So, we shall lift the lid on these commonly held ‘truisms’ in today’s show and if you like the idea, we can look at other so-called truisms in future shows too!
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Today’s must do’s
Did you believe these so-called ‘truisms’ from today’s show? Are there others that you think are true but are not quite sure now? If so, drop me a line and we can do a bit of myth-busting together…let’s help to clear up some of the confusion and set the record straight on a couple of commonly held property beliefs…or hold them up to be true instead!
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Transcription of the show
Hello and welcome to another episode of The Property Voice podcast. My name is Richard Brown and it’s a pleasure to have you join me on the show again today.
Today’s topic is inspired by a listener who asked me to clarify whether the profit made when selling a property is always subject to capital gains tax.
In addition, I shall also explore the ‘property prices double every ten years’ belief as well.
On with the show then
Property tax on profits
Your own home – no tax to pay on gains or profits when sold
BTL property – profits on sale are indeed subject to capital gains tax
Traded property – in cases where the property is not (or never was) your own home and / or if the property was never rented out, then it is likely to be classed as a trading activity and therefore subject to income tax on sales profits realised and not capital gains tax. There is the odd exception but in the most part some people might not be aware that property sold at a profit is subject to income tax if it has not been rented out.
House prices doubling every ten years
Looking at the Nationwide House Price Index, since 1952 house prices have on average doubled every ten year in the 55 years to Q1 2017.
However, there are periods of time when this did not happen on average. There are some periods where house prices exploded at 3 or 4 times growth over a ten year period, such as the 80s and noughties. However, there also some periods where house prices have achieved far more modest growth and not doubled every ten years as well. Examples include the 50s, part of the 90s and quite recently since 2013 in particular.
So, the conclusion is that over a long time period, say 20 years or more, house prices have on average doubled every ten years but over shorter time periods of say 5-10 years, it is not always the case and so the rule cannot be relied upon for short-term periods.
Drop me a line if you would like me to investigate any apparent property truths and I will try and feature it in the show for you.
. Remember that you can email me firstname.lastname@example.org if you want to talk about anything from today’s show or more generally in property investing, the show notes will be over at the website www.thepropertyvoice.net
But for now, all I want to say is thank you very much for listening once again this week and until next time on The Property Voice Podcast…it’s ciao-ciao.