When you sell a residential property that isn’t your main home – such as a buy-to-let or second home – you may need to pay Capital Gains Tax (CGT) on the profit you make. But before calculating your gain, it’s essential to understand which expenses you can deduct. That comes down to one key distinction: is the cost related to a repair, or is it a capital improvement?
Why this matters
The difference between a repair and an improvement significantly affects your tax position. Repairs and maintenance costs aren’t deductible for CGT purposes, although they may be claimed against rental income during the ownership period. Capital improvements, on the other hand – those that upgrade, enhance, or add value to the property – can be deducted from your gain, helping to reduce your final CGT bill.
What qualifies as a repair?
Repairs are defined as works that restore the property to its original condition without improving it beyond that point. These are considered part of the normal upkeep of a property.
For instance, replacing broken windows with like-for-like uPVC units, repainting, redecorating, or fixing a leaking roof using the same tiles all count as repairs. The same applies to tasks like mending damaged guttering, replastering cracked walls, or replacing a broken fence panel with a similar one. Even maintaining the garden – such as trimming overgrown trees or pressure-washing the patio – falls under this category.
While these expenses might be necessary to keep the property in good condition, they are not deductible for CGT purposes.
What counts as a capital improvement?
Capital improvements go beyond routine maintenance. These are works that enhance the property’s value, extend its lifespan, or improve its function or comfort.
Examples include building an extension, a conservatory, or a loft conversion. Installing a brand-new kitchen with upgraded materials and layout, fully modernising a bathroom, or converting a garage into a home office are all considered capital improvements. Other qualifying projects might involve installing a new central heating system, upgrading to underfloor heating, rewiring or replumbing, or fitting new high-end double or triple glazing. Even replacing the roof with longer-lasting or premium materials, or adding solar panels or electric vehicle charging infrastructure, would usually qualify.
What about garden works?
Exterior and garden works can fall on either side of the repair–improvement divide, depending on their scale and purpose.
Simple garden maintenance such as reseeding a lawn, trimming hedges, replacing broken fencing with like-for-like materials, or cleaning patios and paths is not deductible. However, more substantial work – such as landscaping the garden with a new layout, building new patios, adding a summer house or garden office, installing lighting or drainage systems, or converting garden space into a driveway – would generally be treated as capital improvements and could reduce your CGT bill.
Repeated replacements – how are they treated?
Property owners often face questions about repeated upgrades, particularly in areas like kitchens and bathrooms. The key test is whether the work merely restores the property to its original state or enhances it.
Take, for example, a kitchen that is replaced twice during ownership. If the first replacement is a straightforward, like-for-like upgrade due to wear and tear, this is a repair and not CGT-deductible. But if the second kitchen introduces a significantly improved layout, higher-spec materials, and modern appliances, it qualifies as a capital improvement. The same logic applies to bathrooms, windows, roofs, and even garden areas.
Summary Table
| Type of Work | Repair (Not CGT Deductible) | Capital Improvement (CGT Deductible) |
|---|---|---|
| Replacing faulty boiler with similar model | Yes | No |
| Installing heating system where none existed | No | Yes |
| Painting & decorating between tenants | Yes | No |
| Upgrading kitchen layout and appliances | No | Yes |
| Re-roofing with better materials (e.g., slate) | Possibly | Possibly |
| Converting garage to office | No | Yes |
| Replacing fencing like-for-like | Yes | No |
| Landscaping garden with new layout and features | No | Yes |
| Building a new patio or deck area | No | Yes |
| Installing garden office or summerhouse | No | Yes |
| Fixing cracked driveway with similar surface | Yes | No |
| Replacing kitchen twice: 1st basic, 2nd luxury | 1st: No, 2nd: Possibly | Possibly |
Final tips
Always keep detailed records and receipts of the work carried out – including invoices, photos, and plans – in case HMRC requests evidence during a review of your CGT position. The context of the work also matters. If the upgrade was done to add value for resale or improve long-term usability, that usually supports treatment as a capital improvement.
If you’re still unsure whether a particular expense qualifies for CGT relief, get in touch with us at 01142 664 432 or email info@smh.group – we’d be happy to help.
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