Is property development income subject to CGT or Income Tax?

If HMRC considers you to be trading in property (buying, developing, and selling repeatedly), your development income is trading income subject to Income Tax. If you develop properties for long-term investment, gains are CGT. Taxbix advises on how to structure your activity to achieve the most favourable tax treatment.

Can I reclaim VAT on construction costs for a new build?

Builders constructing new residential dwellings zero-rate their construction services. If you are using VAT-registered contractors to build new residential property, you typically do not pay VAT on construction costs, so there is nothing to reclaim. However, self-builders can use the HMRC DIY Housebuilder scheme to reclaim VAT paid on eligible goods.

Do I need a Ltd company for property development?

Property development is often better suited to a Ltd company than individual ownership - Corporation Tax at 19-25% on development profits compares favourably to Income Tax at up to 45%. Retained profits can also be reinvested in the next project without first being taxed as personal income.

What records do I need to keep for a property development project?

Keep all planning documents, architect and surveyor fees, contractor invoices, material receipts, finance statements, and sale documents. These establish the cost basis and deductible expenses for each project and are required if HMRC investigates.

Property & Landlord Accounting

Property Developer Accountant UK

Property development sits at the intersection of investment and trading - and HMRC treats the two very differently. Getting the classification wrong can cost you tens of thousands in tax. Taxbix provides specialist accounting for property developers from first project to portfolio.

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Investment vs Trading: The Critical Distinction

If you buy property to rent long-term, HMRC treats income as investment income (rental income taxed as property income; gains taxed as CGT). If you buy, develop, and sell properties regularly with an intention to profit, HMRC treats the activity as a trade - meaning profits are subject to Income Tax (not CGT) at up to 45%. This distinction has major tax implications and must be planned carefully.

VAT on New Build Properties

New residential builds are zero-rated for VAT - the developer does not charge VAT on the sale but can reclaim VAT on qualifying construction costs. Conversions from commercial to residential benefit from the reduced 5% VAT rate on construction services. Taxbix advises on VAT recovery strategy from day one of each development project.

Development Finance and Accounting

Property development finance typically involves bridging loans and development loans, often with rolled-up interest. Interest on development finance is a deductible cost but must be matched to the specific project and properly accounted for. Taxbix handles the accounting for each development as a discrete project with its own profit and loss account.

Structures and Buildings Allowance

The Structures and Buildings Allowance (SBA) provides a 3% annual tax deduction on qualifying construction costs for commercial and mixed-use developments. Residential-only developments generally do not qualify, but mixed-use schemes can benefit substantially. Taxbix identifies all qualifying expenditure and claims SBA correctly.

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