Glossary
Flip
Buy a property, add value with works and sell it on for a profit.
What it means
A flip means buying a property, usually one that needs work, improving it and selling it rather than keeping it. Profit comes from the gap between the total cost (purchase, stamp duty, works, finance and selling costs) and the sale price. HMRC usually treats flipping as trading, so profits are taxed as income rather than as a capital gain.
Worked example
ExampleBuy for £150,000, spend £30,000 on works and sell for £220,000 after six months.
- Stamp duty (additional property)
- £8,000
- Legals, agent and finance
- £11,640
- Profit before tax
- £220,000 − £150,000 − £30,000 − £19,640 = £20,360
Costs other than the works took nearly £20,000. Budget them before you offer.
Information, not advice. Example figures are fictional and for illustration only.