Am I liable for Capital Gains Tax when selling land?
I have a large garden and am confident I can obtain planning permission for a bungalow to be built in my garden. If I decide to sell the plot (without building the new home) am I liable to pay Capital Gains Tax?
Answers:
UK answer - the principal private residence (PPR) exemption from CGT can include grounds in keeping with the nature of the house. So if you were to sell the whole property the gain would be exempt, including that which relates to the garden.
Where the land is sold separately from the house, the gain can still qualify for PPR relief as long as the owner had 'occupation and enjoyment' (in the legal sense, rather than having to be a keen outdoors type!) of the land with the residence at the date of sale.
Simply put, if you sell it now and the purchaser builds, no tax for you. If you build and sell, the new house is clearly not just the garden of your old house, so the gain would be taxable.
One way around this would be to actually live in the new residence for a period and make the appropriate PPR elections. Although the general intention is that it is only possible to have one PPR at any given time, there are exceptions. In particular, the final 36 months of ownership of a property that has at some point been your PPR is exempt - so, if you actually live in the new house for a period it would be possible to totally exempt the gain without necessarily jeopardizing relief on the original property.
You would need to see an accountant to ensure you do not fall foul of the detailed rules though. Shouldn't be too expensive, especially in comparison to the potential tax saved!
Yes.
Yes, if you sell it for more than you paid for it. I don't know what the point is of your referring to plans to build a bungalow on it. With or without a house on it, sale of real estate is subject to capital gains tax, with certain exceptions.
Yes you are, but you will be allowed about £8k of the gain tax free in a tax year. The calculation is based on a complicated formular of what you paid to get it, priced up to todays prices
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Answers:
UK answer - the principal private residence (PPR) exemption from CGT can include grounds in keeping with the nature of the house. So if you were to sell the whole property the gain would be exempt, including that which relates to the garden.
Where the land is sold separately from the house, the gain can still qualify for PPR relief as long as the owner had 'occupation and enjoyment' (in the legal sense, rather than having to be a keen outdoors type!) of the land with the residence at the date of sale.
Simply put, if you sell it now and the purchaser builds, no tax for you. If you build and sell, the new house is clearly not just the garden of your old house, so the gain would be taxable.
One way around this would be to actually live in the new residence for a period and make the appropriate PPR elections. Although the general intention is that it is only possible to have one PPR at any given time, there are exceptions. In particular, the final 36 months of ownership of a property that has at some point been your PPR is exempt - so, if you actually live in the new house for a period it would be possible to totally exempt the gain without necessarily jeopardizing relief on the original property.
You would need to see an accountant to ensure you do not fall foul of the detailed rules though. Shouldn't be too expensive, especially in comparison to the potential tax saved!
Yes.
Yes, if you sell it for more than you paid for it. I don't know what the point is of your referring to plans to build a bungalow on it. With or without a house on it, sale of real estate is subject to capital gains tax, with certain exceptions.
Yes you are, but you will be allowed about £8k of the gain tax free in a tax year. The calculation is based on a complicated formular of what you paid to get it, priced up to todays prices
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