"I've had an offer for part of my garden..."
A few years ago, I had a client come to see me after receiving an unexpected offer from a developer.
She owned a buy-to-let property with a large garden. Before letting it, it had been her family home for several years. A developer had approached her to buy part of the garden as a building plot, and understandably she wanted to know one thing:
"What will the tax be?"
It's a perfectly reasonable question.
The interesting part was that the answer wasn't straightforward.
As we talked through the history of the property, it became clear there were several different tax issues to consider. The property had once been her main residence before becoming a rental property. We needed to consider whether any Principal Private Residence Relief might still be available, how the original purchase price should be apportioned between the house and the land being sold, and whether there were any wider tax implications arising from the transaction.
Fortunately, she came to see me before agreeing the sale.
That gave us the opportunity to review the position properly and ensure she understood the tax consequences before making any decisions.
Over the years, I've found that many people assume selling part of a garden is simply a smaller version of selling a house. In reality, it can raise several questions that aren't always obvious at first glance.
Every piece of land has its own story
No two properties are exactly the same.
Some gardens have always formed part of a family home.
Others have planning permission.
Some have development potential, while others are simply being sold to a neighbour to extend their garden.
Although these transactions may appear similar, the tax position can be very different depending on the facts.
That's why it's dangerous to rely on someone else's experience or an online forum where the circumstances may bear little resemblance to your own.
It's not just about Capital Gains Tax
Naturally, Capital Gains Tax is one of the first things people think about.
However, it's often only one part of the conversation.
Depending on the circumstances, you may also need to consider:
whether any Principal Private Residence Relief is available
how the original purchase price should be apportioned
whether planning permission affects the overall position
whether the transaction remains a capital disposal or could be viewed differently by HMRC
These aren't questions that can usually be answered with a simple yes or no.
Timing really matters
One lesson I've learnt over the years is that the timing of the conversation is often just as important as the advice itself.
If you seek advice before agreeing the sale, there is usually time to review the position properly.
Once contracts have been exchanged, your options may be much more limited.
That's why I always encourage clients to have the conversation early, even if it's simply to confirm that everything is as straightforward as they hope.
Jonathan's Tip
If a developer approaches you unexpectedly, don't feel under pressure to make immediate decisions.
Before agreeing heads of terms or signing any documents, take a little time to understand the tax position. Even if the advice confirms your original expectations, you'll have the reassurance of knowing you've made an informed decision.
Every transaction is different
One of the reasons I enjoy advising on property transactions is that no two cases are ever identical.
A property's history, how it has been used, who owns it and what is being sold can all influence the tax position.
What appears to be a simple sale of part of a garden can involve several different tax considerations, and understanding those issues at the outset is often the key to avoiding unexpected surprises later.
Further reading
If you're considering selling land or property, you may also find these articles helpful:
Selling Part of Your Garden or Land: When Capital Gains Tax Applies
Capital Gains Tax on Property in the UK: Rules Many Owners Misunderstand
Principal Private Residence Relief: Common Capital Gains Tax Misunderstandings
How we can help
We regularly advise homeowners, landlords and landowners before property transactions take place.
Whether you've been approached by a developer, are considering selling part of your garden or simply want to understand the tax implications before making a decision, we'd be happy to discuss your circumstances.
Sometimes, a short conversation at the right time can make all the difference.
