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TonyTax
TonyTax, Tax Consultant
Category: Tax
Satisfied Customers: 15946
Experience:  Inc Tax, CGT, Corp Tax, IHT, VAT.
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Cash poor, but perhaps land rich. My income is less than 7500

Resolved Question:

Cash poor, but perhaps land rich. My income is less than 7500 pds per yr, if I sold several acres of land for a million pounds would the UK tax rate for the total amount be 18 or 28 percent?
Submitted: 2 years ago.
Category: Tax
Expert:  TonyTax replied 2 years ago.

Hi.

The first £11,100 of gains an individual makes in a tax year are tax free.

If you had an income in 2015/16 of £7,500 and a capital gain of £1,000,000, you'd pay CGT at 18% on £31,785 of the taxable gain and at 28% on the balance of £957,115.

If you used the land for business purposes, you may qualify for entrepreneurs' relief which could limit the rate of CGT to 10%. Take a look here for more information.

I hope this helps but let me know if you have any further questions.

Customer: replied 2 years ago.

Thanks Tony: I was afraid you would come up with the same answer as I. As a follow-up, I've lived in my house for over forty years, and would sell it with the adjoining five acres. The footprint of the house is approximately 1/7th of an acre, can I include sufficient of the land to enlarge that footprint (or garden) to 1.2 acres, the house and 1.2 to be disposed of without capital gains tax, paying the full .28 percent on the remaining ca. four acres?

Expert:  TonyTax replied 2 years ago.

You can claim main residence relief for a plot (house and land) up to half a hectare or about 1.23 acres in size. If the house itself is of a stature and character which demands a large piece of land for its "reasonable enjoyment " (whatever that means!) you may be able to claim main residence exemption for more than 1.23 acres.

Take a look at HS283 for more information on CGT and the main home. Any land fenced off from the main house and garden or let would not be eligible for main residence relief.

Customer: replied 2 years ago.

Thanks. ***** correct that gain from the sale of a main residence does not have to be reported to HMRC, as long as it's always been occupied as the main residence of the seller?

Expert:  TonyTax replied 2 years ago.
That's correct but if part of the gain is taxable (in your case because the plot size is too big), you disclose the whole gain and claim reliefs such as main residence relief for the exempt part.
Customer: replied 2 years ago.

Thank Tony: One further question and I'll ring off. Re the previous question, for simplicity, suppose I sell the house and 1.2 acres separately and in advance from the truncated four- acre paddock?

Expert:  TonyTax replied 2 years ago.
You don't need to do that. In fact, if you sell the house and some land first followed by the paddock, you will have no chance of getting more main residence relief over 1.23 acres as you will no longer be selling part of your main residence in the case of the paddock given that you will have sold the house.
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Customer: replied 2 years ago.

Tony, I promised to ring off after the previous question, but can't resist asking if more than 1.2 acres can be considered "garden" for tax purposes? The property situation is house and five acres, bought years ago specifically to accommodate a few horses (pleasure, not commercial in any way. We still have two such pets that do nothing but eat and make compost).

Expert:  TonyTax replied 2 years ago.
As I said earlier, if the size and stature of the house justifies a larger plot, then you may be able to get main residence relief for a bigger plot. I'd advise you to get in touch with a land agent who may be able to assess the chances of getting a larger plot tax free and an accountant or tax adviser who can tell you how the gain would be split between the taxable and non-taxable parts if you settled on 1.2 acres.
Customer: replied 2 years ago.

Thanks Tony, for your very helpful assistance.

Tom

Expert:  TonyTax replied 2 years ago.
Thanks and good luck.