Selling Your Garden: Tax Implications

7th February 2024

Thinking of selling your garden? Then make sure you read this…


You may be thinking of selling off some surplus land to a developer. If this is part of your garden, you might be thinking it’s tax free because it’s attached to your home. However, before you agree any sale, it’s important to understand the tax implications of selling your garden. Whilst any profit from the sale of your garden may be subject to Capital Gains Tax you may be able to claim Private Residence Relief (PRR). If a successful claim is made you will not pay capital gains tax on any profit realised on sale.


If the sale of your garden is within the ‘permitted area’ of your main residence it can potentially qualify for PRR.


The ‘permitted area’ is basically a garden or grounds of up to 0.5 hectare (including the footprint of the house). HMRC might accept that a larger area qualifies for relief if the garden and grounds are required for the ‘reasonable enjoyment’. Particularly if this is in keeping with the size and character of the property.


To obtain PRR on an area larger than you will need to show that the land was required for the use and enjoyment of the house. This will be a question of fact and will depend on historical evidence of usage.


If planning permission was acquired prior to, or soon after your property purchase then HMRC might consider that it was acquired purely for re-sale. If the land was never part of your garden or permitted area and planning was obtained prior to marketing, this might also indicate you were planning to sell on at a profit.



The tax implications of selling your garden also extend to self-developing and will depend on whether you are:
  • Intending to develop your garden and then sell whatever you build at a profit.
  • Looking to build a new property in your garden as an investment asset for you or your family or to be your new residence.



If the former applies you will be treated as starting a trade as a property developer. You’ll need to consider the value of the land once development starts. Any increase in value from the original acquisition date up to this point may be subject to Capital Gains Tax.


Any profit realised once the development has completed will be subject to Income Tax.



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For further information on Property matters, please contact your local Whitings LLP office.


Disclaimer - All information in this post was correct at time of writing.
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