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Capital gains tax planning

When you buy an item with the intention of selling it for a profit, that transaction is treated as a trade and you should pay income tax on the profit you make on the sale. When you acquire an asset to use or hold for a period, the profit you make when you dispose of that item is treated as a capital gain, which is subject to capital gains tax (CGT). The difference between trading (income tax) and owning an item as an investment (CGT) can change depending on how you intend to use the item. For example, if you buy a house to let then sell it for a profit, you will pay CGT on the gain. However, if you buy a house with the intention of doing it up to improve its value, then sell at a profit, HMRC will view your activity as a trade and charge you income tax, and possibly national insurance, on the profit you make.

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