Don’t Sell Your Large Garden To A Developer: Self Build A New Home

building a new home in your gardenMaking the most of your extra land and factoring in a flexible option

If you have a large garden you’re not utilising to its fullest extent – or an area of land as part of your existing home – then you may have been tempted to sell it off to a developer to make a relatively quick gain. Before doing so, why not consider a self build property to give you potentially more options.

The demand for land

Land is, of course, a finite resource and in many areas of the UK a plot that can be built on will only appreciate in value in the coming years.

Developers are always on the look out for suitable plots, and this can and does include gardens or other areas of land as part of an existing property. It may also include plots of land with an existing property that may need redeveloping, heavy renovation or maybe demolishing.

Measured building surveys may be commissioned in these cases to ascertain the exact specifications and state of a property to decide whether it can be used as part of a redevelopment project.

Perhaps you’re tempted to realise your land asset and exchange the big garden that takes an age to mow and maintain for a sum of money?

The self build option

Before selling your land though it’s definitely worth considering a self build as it can offer various options:

A new home for you – perhaps your present home is now too big for your present needs? Perhaps you’d like to significantly reduce running costs so building a new, more energy efficient home might appeal?

A buy to let investment property – perhaps the idea of building a property and letting it out appeals? The advantage here is you can keep tabs on your investment at all times as it’s adjacent to your present one.

Or, as a variation on this, maybe you plan on moving into the new property as soon as it’s built and letting out your existing one?

Property development – maybe you like the idea of property development? You would effectively become a property developer if you built a home on your plot of land and sold it.

The variation here is if you moved into the new property once it’s finished and sold your existing home.

Flexibility – maybe you like the idea of, for example, letting out the new property for a while with a view to moving in yourself at a later date.

All the above are options if you decided to build a property on your garden or plot of land instead of selling to a developer.

Selling land easier than self building?

It may seem much easier to simply sell a plot of land than build on it, but selling land isn’t as simple as it may appear.

For a start it’s not a good idea to sell land without planning permission being in place, and the time it takes to sell land having made an initial enquiry could take from a year to 18 months.

You’ll also of course require planning permission if you decide to follow the self build route.

Financial implications of self building

Self building is a good idea but it’s important to have a plan in mind as to what you intend to do whether moving into the new property, letting it out, selling it, or variations on these as time moves on.

Tax implications will vary depending on the course of action you take:

Moving into the new property – if you move into the new property then the sale of your old one (if you decide to sell it) is exempt from CGT (Capital Gains Tax).

Furthermore, since the new property has become your main private residence, there’s no CGT to pay on its sale should you put it on the market at a later date.

Letting it out – if you rent the property out as soon as it’s built then CGT would be liable should you sell it at some stage. Also, since the ‘first action’ with your new property was letting it out then you won’t be able to reclaim VAT paid on its construction.

As a variation on the above, if you decide to move into the new property yourself and rent out your existing one then CGT will be due if you sell it eventually (assuming it’s appreciated in value of course).

In both cases there will also likely be an income tax liability on the rental income.

Selling it – if you sell the property as soon as it’s built, then you’re effectively classed as a property developer and as such will incur tax on the profit you make.

Taking advice

As with any major undertaking where larger scale finances are involved, the correct advice should be sought from suitably experienced people. Talk to accountants, maybe a lawyer and – if funding a self build with a mortgage – choose an advisor who understands the self build market not just a ‘standard’ mortgage broker or lender.

More like this in the Planning and Design section

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