Tax Rules
Sale of part of your sole residence (different rules apply if your home is not your sole residence or has not always been your sole residence) is exempt from tax provided that the amount sold is less than half a hectare, that's just over an acre. However you must abide by the following.
- The garden land must not be used for commercial or agricultural purposes at the time of sale.
- There can be buildings on the land but they too should not be being used commercially.
- The plot should be sold unfenced, whilst it is still garden. The building work must not have started before the land exchanges hands or it may be deemed liable to capital gains tax.
- The exchange must be a "clean break" sale, so you can't split profits with the buyer when the finished house is sold.
Sometimes an area larger than half a hectare will be regarded as being part of your Principal Private Residence if, for example, your garden is particularly large and you are only selling a small part of it. But you must get agreement before you exchange contracts on your sale.
Things get complex when your home is not your sole residence, if part of the land you are selling is not in your garden or you have already sold some of your garden before. The best advice is to check with HMRC before you agree to sell.
Please note: This page is intended for guidance only and is no substitute for professional financial or legal advice.