If you are thinking about selling part of your land for development, it is worth seeking professional advice early to consider your possible options, the tax implications and available reliefs.
Relief from Capital Gains Tax
Private Residence Relief is available on the disposal of your main private residence, which, if you are eligible, means that you won’t have to pay Capital Gains Tax. The required conditions include:-
- The property was your main residence throughout the period of ownership
- The garden or grounds are not greater than the permitted area (i.e. half a hectare or less, which is just over one acre.)
- No part of your home has been exclusively used for business purposes during your ownership
- You have not been absent, other than allowed absences or have been living in job related accommodation.
Disposing of part of your garden
You will qualify for Private Residence Relief if you dispose of land that you occupy as your garden, up to the permitted area. Eligible land will be mainly ornamental or used for recreation. If there are buildings in addition to your main residence, some such as a summer house, might be eligible. However, other buildings such as outbuildings might not qualify.
Avoid possible pitfalls
Land that will not qualify for Private Residence Relief include:-
- Buildings that have been used for commercial purposes
- Land that is fenced off or separated from your garden for development
- Land that is in the process of being developed
- A garden that has been disposed of, after you have disposed of your home.
Useful tips
- Maximise your Private Residence Relief by using all of your garden for as long as possible
- Timing is critical. Be clear about the Private Residence Relief qualification criteria and tax implications before you embark on selling your land
- If your garden is over the permitted area it may be possible to get HMRC to agree that your garden would also qualify as part of the Private Residence Relief if, for example, it is needed given the size of the property or is in keeping with other properties of a similar size.
The rules surrounding selling land for development can be complex. Furthermore, if you plan to develop the land yourself, there are additional tax considerations, including income tax, which you should address. Please do consult with a professional advisor early, so that you consider your personal circumstances, the options open to you and how to best mitigate your tax burden.
For further information
HMRC Private Residence Relief
DISCLAIMER: This information is for guidance only, and professional advice should be obtained before acting on any information contained herein. We will not accept any responsibility for loss to any person as a result of action taken or refrained from in consequence of the contents of this publication.
