Hello and welcome to the site. Thank you for your question.If the adjoining cottage is a stand alone property, rated separately and could be sold on its own, then any gain from sale of it would be chargeable to capital gains tax unless it is an integral part of the property you are living in and now cannot be separated.You would be able to deduct costs associated with buying and selling the property from the gain and also claim the gains allowance before arriving at chargeable gain.
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Thank you for your helpful reply. Does the cost of servicing the mortgage count as as "costs associated with buying" ?
Eleanor, thank you for your reply.I am sorry to say the answer is no. If you had let the adjoining property then it would be an allowable expense against the rental income.Interest on loan for private use is outside the scope of tax allowance/relief.I was referring to agents fees, Lawyers fee, stamp duty and survey fees etc as being costs associated with buying.I hope thsi is helpful and answers your question.