Sarah Bradford explains how relief can be obtained for capital expenditure when working out the gain or loss on the disposal of an investment property.
There is no tax to pay on any gain that a person makes when they sell a dwelling that has been their only or main home throughout the time they have owned it.
However, gains made on second homes or on investment properties (e.g., buy-to-let properties or holiday lets), are liable to capital gains tax (CGT). When working out the gain, not only is the initial purchase price deductible, but a deduction is also given for other allowable expenditure. In this way, relief may be available for capital expenditure that has not otherwise been relieved.
What expenditure is allowable?
Expenditure is only deductible in computing any gain or loss on sale if it is incurred:
- on acquiring or creating