If you self build your own home and live in it after completion then there shouldn’t be any self build capital gains tax liability when you sell or dispose of it in the future.
In these circumstances your self build home is your ‘principal private residence’ and as such qualifies for private residence relief. As long it has been your main residence and used as your home and nothing else, you should be exempt from paying tax on any capital gain.
Serial Self Builders
Some self builders repeat the process of building, moving in and moving on, rolling equity gains into subsequent houses and avoiding capital gains tax (CGT) along the way. This is a grey area in tax terms and the Inland Revenue may take the view that self building has become a business and seek to tax the gains as income. This is particularly so if no other sources of income can be demonstrated.
Building In Your Garden
If you own an existing property and want to build your new home in the garden then move from one to the other, it is generally accepted that as long as the first is sold within 12 months of completion of the new home, capital gains tax will not be chargeable on either property. It is possible in some circumstances to negotiate a 12 month extension to this with the Inland Revenue.
Self builders often find themselves in unique circumstances with opportunities for development emerging in addition to the self build. If you are unsure of your tax position then get some professional advice early on from an accountant or tax consultant. It can save you money and help to avoid any nasty surprises.
More Information on Self Build Capital Gains
Capital gains are taxed via self-assessment and it is down to you to declare any gains you believe are taxable.
For more information on tax contact HM Revenue and Customs or visit their website at www.hmrc.gov.uk.
Return to Building Costs
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