Allowable costs vs repairs: what HMRC accepts on a property CGT return

The single most common mistake on a UK 60-day CGT return — outside of forgetting to file altogether — is claiming the wrong costs. Some property costs reduce the taxable gain. Others don't. The line is capital versus revenue and HMRC enforces it strictly.

This guide explains the distinction, lists the costs HMRC accepts, the ones it rejects, and how to evidence each.

The basic rule

Section 38 TCGA 1992 allows three categories of cost to be deducted from the disposal proceeds when computing a CGT gain:

1. The acquisition cost of the asset.
2. Enhancement expenditure — money spent on the asset that is reflected in its state or value at the date of disposal.
3. The costs of disposal.

The two contested categories are usually enhancement expenditure (capital improvements) and the costs of disposal. The acquisition cost is straightforward — the price you paid plus the acquisition costs (legal fees, SDLT, survey). For a detailed look at how Stamp Duty Land Tax paid on purchase feeds into the CGT computation, see our guide on how SDLT and CGT interact on a property sale.

Capital improvements — yes

Spending that adds something new or upgrades an existing feature generally qualifies. HMRC's published examples:

• Extensions — adding a room, conservatory, loft conversion, garage.
• New kitchen — only when replacing with a higher-spec equivalent counts as improvement. A like-for-like replacement is a repair. We come back to this below.
• Central heating where there was none, or upgraded to a new system type (gas to heat pump).
• Double-glazing when fitted to a property that had single-glazing only (replacement glass-to-glass is a repair).
• Bathroom additions (new en-suite where there was none).
• Driveway where there was none.
• Loft insulation where there was none.
• Conservatory added to the property.
• Solar panels added to the property.
• Tree felling and landscaping that materially changes the grounds (one-off).
• Planning permission, architect fees, and building regulations costs related to a qualifying improvement.

Repairs — no

Spending that restores the property to its previous state, or maintains it, does NOT reduce the CGT gain. HMRC examples that fail:

• Redecoration — painting, wallpapering, new carpets (replacement).
• Replacement boiler (same type).
• Replacement windows (like-for-like).
• Replacement kitchen (like-for-like).
• Roof repairs — patching, re-tiling existing areas.
• Damp-proofing repairs to existing damp-proof course.
• Gutter cleaning, garden maintenance, pest control.
• Insurance premiums and ground rent.

If you let the property out, repairs may have been deducted against rental income on your annual Self-Assessment. They cannot be deducted again on CGT.

The kitchen / bathroom test

HMRC's position on kitchens and bathrooms is nuanced. Replacing a kitchen with one of materially higher standard can be partly capital (the improvement element) and partly revenue (the replacement element). Total replacement to a substantially higher specification can be wholly capital if the new kitchen is genuinely an enhancement. Get this wrong both ways and you either lose the deduction or face an enquiry. Keep before/after photos and supplier specs.

"Reflected in the state or value at disposal"

A capital improvement must still be reflected in the state or value of the property when you sell it. If you fit a conservatory in 2010 and demolish it in 2018, the cost of the conservatory is not an allowable cost on a 2025 sale. This is the rule that catches improvements you've later removed, modified, or that have decayed beyond meaningful contribution to value.

For more nuanced cases (e.g. an extension that was rebuilt) take advice — the Chartered Accountant/Chartered Tax Advisor reviewing your return will flag where evidence is thin.

Costs of disposal — yes

Costs incurred to sell the property:

• Estate agent fees.
• Conveyancing solicitor's fees related to the sale.
• EPC and home-information costs.
• Auction fees if sold at auction.
• Mortgage exit / early-redemption fees if those are a genuine cost of selling. (Note: ordinary remortgage redemption fees usually aren't allowable. The fee must specifically relate to selling.)
• Cost of advertising the property if you sold privately.

Stamp Duty paid by the buyer is not your cost. The buyer's SDLT only appears in your acquisition cost computation when you were the buyer.

Costs of acquisition — yes

Costs to acquire the property:

• Conveyancing solicitor's fees on purchase.
• Stamp Duty Land Tax (SDLT) you paid as buyer.
• Survey and valuation fees.
• Land Registry fees.
• Search fees.
• Mortgage arrangement / valuation fees — generally allowable as part of the cost of acquiring.
• Auction premium / bidder fees.

Buying agents' fees are allowable if specifically incurred to acquire the property.

Costs HMRC will reject

• Furniture and fittings — moveable items that aren't part of the building. (Note: integrated appliances may be different — see below.)
• Routine maintenance during ownership — gardening, cleaning, council tax, ground rent.
• Mortgage interest — never an allowable cost for CGT (and post-Apr-2020 only available as a 20% tax credit against rental income, separately).
• Tenant-funded improvements — if your tenant paid for it, it's not your cost.
• Insurance — buildings insurance, landlord insurance.
• Utilities during void periods.
• The "value" of your own labour if you did the work yourself.

Integrated kitchen appliances are a grey area — items physically built in and forming part of the kitchen (e.g. an integrated oven supplied with a new kitchen install that's clearly an improvement) can sometimes be included. Standalone white goods that move with you cannot.

Worked example

Frank bought a buy-to-let in 2010 for £180,000. SDLT and legal fees on purchase: £4,500. In 2014 he added a loft conversion costing £35,000 (planning + build). In 2019 he replaced the kitchen with a "premium" one for £15,000. In 2022 he replaced the boiler (same type) for £3,500. He sold in 2025 for £340,000. Selling costs (EA + legal): £7,800.

Allowable enhancements / costs:

Gain: £340,000 − £236,300 = £103,700. After £3,000 AEA, taxable on £100,700. At 24% = £24,168.

If Frank had claimed the boiler and the full kitchen, his gain would have looked £9,500 lower and his tax £2,280 less — but an enquiry would have stripped it back, plus penalties and interest.

Evidencing costs

HMRC can enquire into a CGT return up to 12 months after filing (longer if errors are suspected). For a full picture of what documents to gather before you start, see our complete document checklist for a 60-day CGT return. The records you need:

• Solicitor's completion statements for acquisition and disposal.
• Itemised invoices for capital works — not just bank statements. The invoice description matters ("new extension" vs "general works").
• Before/after photos for major improvements — especially kitchens and bathrooms.
• Planning permission and building regulations sign-off for extensions.
• Architect's drawings for substantial works.
• Specifications showing the new spec was higher than the replaced item.

We pull figures from your completion statement automatically. For improvement evidence, you upload the invoices and we tell you which qualify and which don't.

What we do for you

When we review your documents we:

1. Extract every figure from the completion statements (both sides of the deal).
2. Categorise each cost as acquisition, enhancement, or revenue.
3. Reject items that fail the capital test (with reasons you can read).
4. Apportion mixed-purpose costs (e.g. kitchen with both elements).
5. The Chartered Accountant/Chartered Tax Advisor who signs your return confirms the categorisation.

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Further reading

• The 60-day CGT property deadline
• Private Residence Relief explained
• HMRC Capital Gains Manual: CG15150 (allowable expenditure)
• HMRC Business Income Manual BIM46900 (repairs vs improvements line, relevant by analogy)