Income tax question

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    Income tax question

    If I bought a property for 60k cash and spent 5 k on refurb and deducted the 5k against income. Then the property was worth 100k. if I re - mortgaged the property on a 75% LTV so took 75k out which would be a 10k profit am I right in saying there is no income tax due on the 10k. The tax due would be CGT when selling ?

    Hi Philip
    My understanding is that the £5k costs are considered capital expenditure and not income and can only be used on disposal before CGT is calculated.


      Exactly what I thought but was then advised that expenses before let are treated as deemed on first day of let so allowable.

      Need clarification on this to now .


        It depends what the costs were.

        If they are betterment, they're capital, if they're maintenance/repairs, they're operating costs (and allowable against income).

        Generally speaking most replacement of things in a property will include an element of improvement (which HMRC accept), so it's a question of detail and art.
        If you added a new bathroom, it's probably capital, if you replaced the units in an existing bathroom it's probably operational.

        You make your best and reasonable judgement and be prepared to justify it.
        When I post, I am expressing an opinion - feel free to disagree, I have been wrong before.
        Please don't act on my suggestions without checking with a grown-up (ideally some kind of expert).


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