Capital gains tax and gardens

When selling a property, homeowners often assume that any profit is automatically free from Capital Gains Tax (CGT) due to Principal Private Residence (PPR) relief. However, this relief does not always apply in full, particularly where gardens, grounds, or garages are involved. Understanding capital gains tax and gardens is essential to avoid unexpected tax liabilities.

How Principal Private Residence Relief Works

PPR relief allows homeowners to sell their main residence without incurring CGT. However, for the relief to apply, the land sold must be part of the property’s “permitted area.” This typically includes:

  • The main house
  • The garden and grounds up to 0.5 hectares (1.2 acres)
  • Outbuildings such as garages, if used in connection with the home

If the total land exceeds 0.5 hectares, HMRC may challenge the PPR relief claim unless it can be demonstrated that the additional space was necessary for the reasonable enjoyment of the home.

Do Gardens and Garages Need to Be Adjacent?

HMRC accepts that gardens, garages, or additional land do not have to be immediately adjacent to the property to qualify for PPR relief. However, it must be demonstrably used with the home.

For example:

  • A garage on a separate plot but used exclusively for the house may still qualify.
  • A garden across the road may be eligible if it has been consistently used as part of the property.

However, if part of the land is rented out or used for a business, PPR relief may not apply to that portion.

Key Risks to Watch Out For

  • Selling part of the garden separately may trigger CGT, especially if the land is sold for development.
  • If HMRC deems any part of the land unnecessary for the property’s enjoyment, relief may be restricted.
  • Large gardens or detached garages could be questioned if they exceed typical residential use.

How We Can Help

Navigating capital gains tax and gardens can be complex. At Lewis Brownlee, we provide expert guidance to ensure your property sale is tax-efficient.

If you’re considering selling land with your home, contact us for tailored tax advice. Visit our contact page to speak with our experts today.