Capital Gains Tax on Land and Farmland

Residential property and land gains are taxed at the lower rate of 18% within basic rate tax band and the higher rate of 28% in the higher rate tax band.

Non-residential property and land gains are taxed at the lower rate of 10% within basic rate tax band and the higher rate of 20% in the higher rate tax band.

Residential property as well as non-residential and trading business property and land gains owned by a limited company are taxed at corporation tax rates of currently between 19% and 25%.

Non-residential trading business property and land gains may benefit from Business Asset Disposal Relief and Business Asset Rollover Relief (if personally owned rather than by a limited company).

Any gains on the sale of farmland with planning permission for residential or mixed-use redevelopment is taxable at the above residential rates of up to 28 per cent as it was sold with residential use rather than the lower rate of 10 per cent under Business Asset Disposal Relief (used to be called entrepreneurs' relief) unless the sale constitutes a disposal of part of a trading business.

Business Asset Rollover Relief (if the land is classed as business/trade use)

A capital gain on the disposal of a trading asset can be deferred by rolling it over against the cost of another business asset.  The Capital Gains Tax (CGT) cost of the new asset is reduced by the gain so that when the replacement asset is sold the gain comes back because of the reduced deductible cost.

To qualify for Business Asset Rollover Relief:

• You must buy the new business assets within 3 years of selling or disposing of the old ones (or up to one year before).
• Your business must be trading when you sell the old assets and buy the new ones.
• You must use the old and new assets in your business.

You can claim rollover relief on assets including:

• Business land and buildings.
• Fixed plant or machinery, for example a laser cutting machine.

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