Photo: Maria Orlova

What tax will I pay if I build a house in my garden?

If you have the appetite to see the project through yourself and plan to sell for a profit on completion, you are at risk of being taxed as a property developer. This means profits will be subject to income tax at up to 47 per cent, after deducting build costs and the value of the land.

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We are thinking of building a house in the garden of our home. We would then aim to sell both properties, but are unsure of the tax position.

Is there a legitimate way of avoiding capital gains or other taxes on the sales?

Yvette Jacobs, tax partner with accountants Kingston Smith, replies: With the continued demand for new housing and people looking to maximise the potential of their property assets, in-fill building on garden plots is an increasingly hot topic. If you can convince the planning authorities and have no objections from your neighbours, the popularity of self-build programmes on the television may make it look easy, but there are big tax traps for the unwary and the net-of-tax cash in your pocket will depend very much on how the project and the final sale is structured.

Building plans: Once the house is built, will the owner face a tax bill if they go on to sell it?

Successfully obtaining planning permission for the garden and then selling the plot off to a builder could be achieved without paying any tax at all, where the circumstances are right and Principle Private Residence relief applies. This important tax relief for homeowners enables a disposal of their home, or a part of it, free of capital gains tax. The main residence relief will encompass a garden of half a hectare, or an area a little under the size of a football pitch – but it could cover more if the ‘size and character’ of the main house justifies it. If you have the appetite to see the project through yourself and plan to sell for a profit on completion, you are at risk of being taxed as a property developer. This means profits will be subject to income tax at up to 47 per cent, after deducting build costs and the value of the land. You may avoid being taxed as a property developer if you develop the garden and intend to hold the new property as an investment or ‘build-to-let’ property. Relief will be available for build costs when the property is sold or given away in the future and the profit will be subject to capital gains tax at 28 per cent. Although there is no rule how long a property must be let before sale to avoid the higher rates of income tax, it will be important to show the plan was to let it out and not just sell for a quick profit. If moving in and living in the new property is just too much to resist once it is complete, a sale of the original home can be free of capital gains tax where the conditions of Principle Private Residence relief are met.

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How much heat does a tea light give off?

One tea candle can produce around 30 watts of heat, which means that you need at least 20 to 30 tea candles to heat a very small room (and replace them every 3 to 4 hours).

notechmagazine.com - Don't Heat your Room with Tea Candles - No Tech Magazine

Friends and readers keep sending me links to a “low-tech” heating system in which tea candles heat a combination of ceramic flower pots. It seems you all need a course in thermodynamics, so let’s start with some basics: 1. First law of thermodynamics: you can’t create energy out of nothing, (and you can’t destroy it). This means that placing two ceramic pots on top of four candles does not increase heat production. You get the same amount of heat if you burn four candles without the pots.

2. Now imagine heating your room with four tea candles.

3. Get more tea candles. One tea candle can produce around 30 watts of heat, which means that you need at least 20 to 30 tea candles to heat a very small room (and replace them every 3 to 4 hours). 4. You have now built a small fireplace using tea candles. However, it isn’t running on wood but on petroleum — the stuff paraffin is usually made of. And above all, you have built a fireplace without a chimney. Chimneyless fireplaces are very efficient, but they’re not so healthy and that’s exactly why the chimney was invented. Connecting your tea candle fireplace to a chimney will solve the indoor air pollution issue, but unfortunately 85-90% of the heat will then escape through the chimney. So you need more candles.

5. Forget tea candles, get some thermal underwear.

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