I live in Scotland and am going to sell my flat. I bought…

Thanks.

For the purposes of my calculations I'm assuming you sell the property in September 2011. Based on the figures you have provided you will make a gain of £61,000 (£120,000 - £44,000 - £15,000). You may be asked to prove the improvement expenditure by the tax office so keep the receipts and invoices. Any part of the work which is deemed to be repairs as opposed to improvements will have the cost disallowed.

The gain for the period that the property was your main home is exempt from CGT as is the gain for the last 36 months of ownership. That accounts for £36,600 (£61,000 / 130 months x 78 months). The remaining gain of £24,400 is that part of the letting period gain which is not covered by the last 36 months of ownership.

As the property was both your main home and it was let you are entitled to letting relief which is the lesser of:

1 £40,000,

2 the sum of the main residence period gain and the gain for the last 36 months of ownership of the property which is £36,600 and

3 the letting period gain of £24,400.

The letting relief of £24,400 will cover the letting period gain so there will be no taxable gain and no Capital Gains Tax liability.

If the tax office disallowed all the "improvement expenditure which is unlikely, you'd still have no Capital Gains tax to pay. The exempt gain would be £45,600 and the letting relief of £30,400 would cover the letting period gain.

Let me know if you have any queries.