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Where Taxpayers and Advisers Meet

CGT on sale of property split into two and part rented

ajmilford
Posts:1
Joined:Sun Apr 24, 2022 8:27 am
CGT on sale of property split into two and part rented

Postby ajmilford » Sun Apr 24, 2022 8:43 am

Here is the story:

In 2010 we purchased a bungalow with an attached annex as a single property for 230000.
We rented out the bungalow part of the property.
We spent about 15000 renovating and changing the annex, putting in separate utilities etc.
We have then lived in the annex as our primary residence since 2010.

We now propose to sell both properties.
We are proposing to get planning to recognise the annex and bungalow as separate dwellings and to sell as two separate units.

We expect to sell the bungalow for 300000 and the (former) annex for 200000.

Can someone help with how we will need to proportion the gain for CGT?
Is the gain based on total gain of 500000 - (230000 + 15000) = 255000 and simply proportion according to final/expected sale figures?
So CGT payable on gain of 300 * 255000/500 = 153000?
This seems somewhat harsh as most of the gain in the total value of the two properties is due to the creation of the separate annex which is our primary residence.
Or is it just on the gain of the bungalow from 230000 to 300000?

Would we need evidence of the 15000 we spent on the rework of the annex?

Thanks in advance for your help.
Andrew

bd6759
Posts:4262
Joined:Sat Feb 01, 2014 3:26 pm

Re: CGT on sale of property split into two and part rented

Postby bd6759 » Mon Apr 25, 2022 9:30 am

The sale of the annex will be exempt from tax.

To ascertain the allowable costs you will to appoint a qualified surveyor/valuer to value the annex at the time of your purchase. To that value you add the costs you incurred renovating and creating a distinct living space.


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