I would appreciate some guidance on how I would calculate capital gain.
I purchased a residential property which is not my home. I then purchased a piece of neighbouring land which is non-residential. Should I then want to combine some of the garden from the residential property with the piece of neighbouring land, I would like to understand the amount of capital gains that I have made. I have provided examples below with some imaginary figures.
Scenario 1
Residential Property purchased at £140,000
Land purchased at £7,000
Combined land and garden sold for £20,000
Therefore, is the capital gain £13,000, or is the capital gain reduced by using some of the £140,000? If so how is the amount worked out?
In this scenario how would this affect the capital gains made on the property if it was sold at a later date? i.e. would any capital gains made on the property be based on the original £140,000 purchase price, or a revaluation at the time of the land sale?
Scenario 2
Residential Property purchased at £140,000
Land purchased at £7,000
Residential Property built on land at a cost of £100,000 and sold for £150,000
Again, how would this affect the capital gains made on the original £140,000 property if it was sold at a later date?
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