Investment property CGT

amylan

Hoping someone knowledgeable could assist. In 2012 I purchased a residential investment property in my own name that has been rented out since. I shall shortly be terminating the tenancy as the time has come to sell the property with vacant possession. When the tenants have moved out and before putting the property on the market for sale, some modernisation works will be required to make it a saleable family home - new bathrooms, new kitchen, rewire, replace leaking conservatory with extension.

Can I clarify that the sale would be subject to CGT and not IT? I am thinking specifically in relation to me undertaking these modernisation works prior to sale, as I wouldn't want to be accused of being a property trader. and subject to IT. Any advice would be greatly appreciated.

Jeremy535897

Based on what you have said, it is extremely unlikely that what you propose to do would cause any part of the profit you hope to make to be subject to income tax. There might be a slight risk if you need planning permission for the extension. You can read all about this subject here:
https://www.gov.uk/hmrc-internal-manuals/business-income-manual/bim60305 et seq.

Be aware that any enhancement expenditure has to meet certain rules to reduce a capital gain on a sale:
https://www.gov.uk/hmrc-internal-manuals/capital-gains-manual/cg15180

Expenses that would have qualified for a revenue deduction from rental income may possibly qualify for post cessation expenses relief. See:
https://www.gov.uk/hmrc-internal-manuals/property-income-manual/pim3000

It is easier to claim relief if the rental business continues (in other words if you have other rental properties).