How do I calculate the CGT computation on this one?
Hi folks, Any help with this situation would be greatly appreciated! With the long-term tenant now gone, I’ve decided to sell this very well-looked after, well maintained garden flat. It’s in South Gloucestershire, recently claimed to be in the top ten fastest-selling destinations of England. I need to get my skates on to understand the CGT aspect before I put it on the market after Easter.
Here’s the potted history:
1. The property was bought as a derelict large Victorian mid-terrace shop in 1989 for the overpriced sum of £45k with an admin nightmare to overcome. It was VOA commercial and had a ‘closing order’ on any human habitation.
2. The property was completely rebuilt from the ground up (due to no shop front foundations) on the same site with mains utilities brought in for the first time. Very costly but all worked out in the end.
3. The property was my home for 17 years. As a family home with 4 bedrooms, 3 bathrooms it served me very well. Lovely south-facing garden but it always was street parking only.
4. Rather than sell the house in 2008 to the only interested purchasers (wanting to re-create it as a multi-bed hostel) I split it into 2 flats which actually worked very well with minimal work needed on the layout). It still cost a considerable figure for the soundproofing etc + I had all the new fittings required for the utilities, the new kitchens, new bathrooms, new entrances, doors etc. It worked well – it was all done in 6 months.
5. I’d moved out for the works to start and was expecting to make my permanent home across town in one of my rental properties there. I stayed only 6 months before having to return to my old address in 2009 due to changed family needs local to it. I moved back in to what was now the First Floor Maisonette. I remained there until October 2014 while my next place remained uninhabitable during rip out works.
6. The Ground Floor flat was rented out from 2009 and has been rented out consistently ever since.
7. The whole property remains under its original Title Deed when I bought the property in 1989.
I need to separate the Title Deeds in the process of the sale of the Ground Floor Flat – but how is this recognigsed?
a: The starting point of my capital expenditure on the original purchase £45k
b: The purchase date of 1989 which is the starter of Gov UK’s calculator for the increase in value of the property today?
c: Agree another format – to calculate the fair amount. This is what I need the most help with!!
Karen
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Member Since February 2011 - Comments: 3454 - Articles: 286
9:45 AM, 17th April 2025, About 1 year ago
This is a really great, clear summary — and you’ve already done half the accountant’s job by laying out the timeline so precisely. You’re right to pause here before rushing to market, because the CGT calculation for a property like this, with such a complex history, isn’t quite as straightforward as the GOV.UK calculator makes it seem.
1. Single Title, Later Split:
Because the entire property has always remained under one title (even after conversion into two flats), HMRC will treat the building as a single capital asset until the first part is sold. When you now sell the Ground Floor Flat, you’ll need to apportion the original base cost (£45,000) and any qualifying capital improvements between the two flats. This is usually done on a reasonable basis — most commonly market value at the time of split or floor area proportions.
2. CGT Calculation Framework:
When you sell the Ground Floor Flat, the formula would be:
Final Sale Price
– Proportion of Original Purchase Price (£45k)
– Proportion of any capital improvements (extensions, conversions, major works)
– Selling costs (legal, estate agent, etc.)
= Chargeable Gain
Private Residence Relief (PRR) can also apply for the years you lived there — but only for the portion of the property that was your main residence, which for the Ground Floor Flat would be… never, since you lived in the first floor maisonette post-split.
3. What Counts as ‘Capital Improvement’?
You’ve done a huge amount of work over the years, but only certain expenses count toward reducing CGT. Here’s a guide:
Work Done Qualifies? Notes
1989 Full rebuild & utilities ✅ Yes Essential structural work: included.
2008 Conversion into two flats ✅ Yes Structural alteration to create new asset.
Kitchens, bathrooms, soundproofing ✅ Mostly If it’s capital in nature (not maintenance).
General maintenance & repairs ❌ No Revenue expense — not deductible for CGT.
4. Apportioning the Original £45k & Improvement Costs:
You’ll need to determine:
What percentage of the property’s value is represented by the Ground Floor Flat (usually based on either floor area or professional valuation at the time of sale or split).
Apply the same percentage to the purchase price and the capital improvements.
So let’s say the Ground Floor Flat makes up 50% of the property’s value:
Purchase cost = £22,500.
If you spent (hypothetically) £80,000 on the rebuild + £40,000 on the 2008 split and improvements, the same 50% rule applies — so £60,000 could be added to the Ground Floor Flat’s base cost.
If the split wasn’t valued formally back in 2008, you could get a surveyor to do a retrospective valuation or agree a reasonable split with HMRC based on square footage and amenities.
5. Purchase Date & CGT Calculator:
For the GOV.UK calculator:
The purchase date is 1989, because the flat was part of the original purchase.
The cost base is the apportioned share of the £45k plus qualifying capital improvements.
6. Private Residence Relief (PRR):
Since the Ground Floor Flat was rented out from 2009 onwards and never occupied as your principal home, no PRR will apply to this part — but when you eventually sell the First Floor Maisonette, PRR will help reduce that gain, since you lived in it from 2009 to 2014.
7. Recommended Steps:
Get a current valuation for the whole building and the Ground Floor Flat individually (your solicitor will also want this for the title split).
Estimate or dig out records of your capital expenditure (rebuild + split + improvements).
Apportion the base costs (purchase price + qualifying improvements) based on fair methodology.
Calculate selling costs (solicitor, estate agent, EPC, etc.) — these are deductible too.
Use the apportionment in the GOV.UK CGT calculator to get a sense of the liability.
If the figures are substantial, it’s well worth running them past an accountant or tax adviser for confirmation.
Member Since February 2016 - Comments: 194 - Articles: 1
10:56 AM, 17th April 2025, About 1 year ago
Reply to the comment left by Neil Patterson at 17/04/2025 – 09:45
Thank you, Neil. Much appreciated!
Member Since June 2015 - Comments: 194
11:57 AM, 17th April 2025, About 1 year ago
Reply to the comment left by Neil Patterson at 17/04/2025 – 09:45@ Neil
I am not sure that I agree that no PPR is claimable on the sale of the ground floor flat.
From 1989 to 2009 the whole property was the OP’s main residence. Up until the date of the split the ground floor was part of the PPR and therefore I beleive that PPR can be claimed on this part.
See HMRC manual CG65265 which I think agrees with this.