Selling Part of Your Property: Will You Pay Capital Gains Tax?
If you’re thinking about selling part of your garden or property, it’s important to consider the potential tax implications. One of the biggest questions homeowners ask is: “Will I need to pay Capital Gains Tax (CGT?”)
The answer often depends on whether the sale qualifies for Private Residence Relief.
What is Capital Gains Tax?
Capital Gains Tax is the tax you pay on the profit (or “gain”) when you sell or dispose of an asset that’s increased in value. In property terms, this applies when you sell land or part of your property, unless the transaction is fully covered by Private Residence Relief.
Private Residence Relief: When You Don’t Pay CGT
You won’t pay CGT if your home and land meet all the following conditions:
You have one home and you’ve lived in it as your main home for the entire time you’ve owned it.
You have not let part of it out (though having a lodger is allowed).
You have not used part of your home exclusively for business purposes (occasional or temporary use as a home office is fine).
The grounds, including all buildings, measure less than 5,000 square metres (just over an acre).
You did not buy the property solely to make a financial gain.
If you meet all these requirements, the gain you make from selling part of your property will automatically be tax-free.
When Might You Pay CGT?
You may face a CGT bill if:
The grounds of your property exceed the 5,000m² threshold.
You’ve used part of your home exclusively for business.
You’ve let out part of your property (beyond simply having a lodger).
The property was purchased with the intention of selling it on for profit.
In these cases, only the proportion of the gain that does not qualify for Private Residence Relief will be subject to tax.
Special Considerations
Married couples and civil partners: You can only count one property as your main home at a time.
Selling property abroad: Different rules apply if you’re disposing of a property outside the UK.
Partial sales: If you sell part of your garden or land separately, your eligibility for relief may depend on how the land relates to your main home.
What To Do Next
If you’re unsure whether your sale qualifies for Private Residence Relief, it’s best to seek professional advice. You can also use the UK Government’s online checker to see whether you’ll need to pay CGT and how much relief you may be entitled to.
Key Takeaway
Selling part of your property doesn’t always mean paying Capital Gains Tax. If your home and grounds fall within the Private Residence Relief rules, you won’t owe any tax on the gain. But if they don’t, CGT could apply — so it pays to check before you sell.
The good news is, Snaith & Grey Homes can support you through this whole process.
If you have land to sell, simply contact us and we can guide you through it, step by step.
