Nobody thinks about record-keeping on the day they buy a property. They think about it on the day they sell one, and by then it is usually too late.
Across Richmond, Twickenham, East Sheen, and the wider South West London area, property values have grown substantially over the past fifteen years. A buy-to-let purchased in 2009 for £310,000 might now be worth £650,000 or more. That growth is good news, obviously, but it also means the capital gains tax liability on disposal has grown with it. And that liability is calculated not just on the difference between the purchase price and the sale price, but on the difference between the sale price and the total allowable cost base, which includes the original purchase costs, any qualifying improvements you have made to the property, and the costs of selling it. Every receipt you can evidence reduces the taxable gain. Every receipt you have lost increases it.
The difference can be worth thousands of pounds.
What you will learn
- What HMRC counts as an allowable cost, and what it does not
- The difference between an improvement and a repair, and why it matters
- How missing records increase your tax bill, with a worked example
- What to keep, how to keep it, and how long for
- What to do if your records are already incomplete
What counts as an allowable cost?
Purchase costs: solicitor’s fees, Stamp Duty Land Tax (SDLT), survey fees, and estate agent fees on the original purchase.
Capital improvements: extensions, loft conversions, structural work, new central heating systems, and kitchen or bathroom replacements where the specification is significantly higher than what was there before. Replacing like for like is generally a repair, not an improvement, even if the materials are modern equivalents.
Sale costs: estate agent commission, solicitor’s fees on disposal, Energy Performance Certificate costs.
Not allowable: general maintenance, like-for-like repairs, redecoration, insurance, mortgage interest, or any cost you have already claimed as a rental expense.
Improvements versus repairs: the distinction that costs people money
HMRC draws a clear line between an improvement and a repair, and getting it wrong can be expensive in both directions. An improvement is capital expenditure that enhances the property beyond its original state, and it is added to your cost base, reducing your capital gain when you sell. A repair is revenue expenditure that restores the property to its original condition, and if the property is let, it is deductible against your rental income instead. You cannot claim the same cost in both places.
The grey area is where most of the confusion lives.
Replacing a boiler with a like-for-like equivalent is a repair. Replacing an old boiler with a modern combi system as part of a full central heating upgrade is more likely to be an improvement. Replacing a kitchen to the same standard is a repair. Replacing a kitchen with a significantly higher specification, different layout, or integrated appliances is an improvement. The test is whether the work has enhanced the property beyond its original state, and that judgement is not always straightforward, which is why keeping detailed records of what was done and why, including before-and-after photographs where possible, is so important.
For landlords who are already claiming repairs against rental income, the temptation is to put everything through the rental accounts and reduce the income tax bill year by year. But if a cost genuinely qualifies as an improvement, you may be better off not claiming it as a rental deduction and instead adding it to your capital cost base, particularly if you are a higher-rate taxpayer facing a significant capital gain on eventual sale. This is exactly the kind of decision where proper tax planning makes a measurable difference, because the right answer depends on your marginal rate, your expected holding period, and the likely gain.
What missing records actually cost you, a worked example
To make this tangible, here is a simplified example based on a buy-to-let property in the Richmond area. Two identical properties, two different record-keeping habits.
The difference in tax is roughly £12,500, and it comes entirely from the owner’s ability to evidence the costs they actually incurred. The £48,000 in improvements, a loft conversion, a new bathroom, rewiring, were all genuinely spent. They all qualify as allowable costs. But without the invoices, contracts, and payment records to prove it, HMRC has no obligation to accept them. The owner without records pays £12,500 more in CGT on the same property, sold on the same day, for the same price.
That is an expensive filing cabinet.
We see this pattern regularly with clients in Richmond and South West London who bought properties ten or fifteen years ago. The improvements were made, the money was spent, but the paperwork was not kept because nobody was thinking about CGT at the time. By the time the sale happens, the receipts are gone and the tax saving goes with them.
What to keep, and how
The good news is that the system you need is not complicated. It does not require specialist software or an elaborate filing structure, although a cloud accounting platform can make retrieval much easier when the time comes. It requires a folder, physical or digital, for each property, and the discipline to put things in it.
For each property, keep the completion statement from when you purchased it, which will show the price, SDLT, and solicitor’s fees. Keep every invoice for capital works, ideally with a brief note of what was done, along with proof of payment. Keep any correspondence with planning authorities or building control if you have undertaken structural work or extensions. If your property records feed into your annual rental accounts, make sure your bookkeeper or accountant is flagging which costs are capital and which are revenue, so the distinction is maintained from the outset rather than reconstructed years later.
Photographs are underrated.
A dated photograph of a property before and after a kitchen replacement, an extension, or a bathroom renovation is not formal evidence in the way an invoice is. But it supports the narrative if HMRC queries a claim, and it can help your accountant reconstruct the scope of work if some of the paperwork is missing. It costs nothing and takes thirty seconds.
How long should you keep records? HMRC can enquire into a CGT return for up to four years after the filing date, but for property held long-term, you need the original purchase records for as long as you own the property and for at least six years after disposal. The simplest rule is to keep everything until your accountant confirms the tax position is final and the enquiry window has closed. Xeinadin’s accounts service can advise on retention periods for your specific situation.
What to do if your records are already incomplete
If you are reading this and realising that your property records have gaps, do not panic.
Start by gathering what you do have. Bank statements from the period of purchase or improvement work can evidence payments even if the original invoices are lost. Solicitors often retain copies of completion statements for many years, and it is worth asking. Building contractors who carried out significant work may have records of the job, particularly if they are VAT-registered and needed to retain their own invoices. If you extended the property and required planning permission, the local authority, in this case the London Borough of Richmond upon Thames, will hold records of the application, and those can help establish the date and scope of the work.
For properties that were inherited or received as a gift, the base cost for CGT purposes is generally the market value at the date of transfer, not the original purchase price paid by the previous owner. The important exception is transfers between spouses or civil partners, which are usually made on a no gain/no loss basis, meaning the recipient inherits the original base cost rather than receiving a revaluation. In either case, establishing the correct base cost is easier and more reliable if a formal valuation or proper records were obtained at the time, and if you are in this position it is worth having a conversation with your accountant sooner rather than later, because the tax planning options are wider when there is time to act.
The 60-day reporting deadline
Since April 2020, UK residents disposing of residential property at a gain must report and pay the CGT within 60 days of completion. This is a much tighter window than the old Self Assessment cycle, and it means that all your cost evidence needs to be assembled quickly, not at your leisure. If your records are already organised, this is manageable. If they are not, the 60-day clock creates real pressure, and we have written about this in detail in our guide to the CGT reporting trap for property owners.
The best time to organise your records is before you decide to sell, not after.
A small habit with a large payoff
Property record-keeping is not glamorous. It is the kind of task that feels unnecessary right up until the moment it saves you several thousand pounds.
The owners who benefit most are the ones who treat it as a quiet, ongoing discipline rather than a frantic exercise when a sale is on the horizon. A folder per property, invoices filed as they arrive, a note of what work was done and when. That is all it takes. If you own property in the Richmond area and you are not sure whether your records are in good shape, or if you are thinking about selling and want to understand the CGT position before you instruct an agent, you can reach our Richmond team here.
About the author
Donovan Crutchfield is Area Managing Partner at Xeinadin Richmond and founder of TaxAgility. He is ACA-qualified and works with owner-managed businesses, professionals, and growing SMEs across Richmond-upon-Thames and South West London.
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