My wife and I bought a plot with an ageing bungalow a few years ago. We demolished the bungalow and have built a new house which is nearing completion. We will not be declaring the new house as our principal residence, at least until we sell our existing house at some point in the next few years.
How will HMRC place an initial value on our new property when the time comes to sell (probably not for a few years at least) and we have CGT to pay? Will the value equal the purchase price of the original house plus the cost of demolition plus new build costs? Or will HMRC have some other way of arriving at an initial value?
The reason for asking is that we have probably spent more than the current market value of the new house on the combined purchase, demolition and new build costs, and it would be good to be able to keep track over time of what an eventual CGT charge might be. Also, it might help us to gauge when we should sell our existing house and nominate the new build as our principal residence.
Any advice gratefully received. Thanks.
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