CG17318 - Indexation: from 6/4/88 example: indexation allowance

This example illustrates the freezing of indexation allowance for disposals made on or after 6 April 1998, except for disposals made by companies within the charge to Corporation Tax.

In June 1987 Miss D buys an investment property for £80,000. In July 1998 she has an extension built onto the property at a cost of £20,000. Then in September 1999 she sells the property for £180,000 less costs of £2,000.

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- - Amount
- Disposal Proceeds 180,000
LESS Costs of disposal 2,000
- - 178,000
LESS Cost of acquisition 80,000
- Enhancement expenditure 20,000
Unindexed gain - 78,000
LESS indexation allowance to April 1998 80,000 at 0.596 47,680
Indexed gain - 30,320

There is no indexation allowance on the enhancement expenditure because it was incurred after 31 March 1998.

Because the disposal was made before 6 April 2008, taper relief, see CG17895+, may be due in calculating the CGT due on the gain, see CG17895+ (available from National Archives as explained at CG10100).