Tax Planning for Agricultural Land Sales

As agricultural land values are increasing, and even more consideration is being given to what should be done with your land in the future, the tax implications of a sale could be more relevant than ever.

What tax will I have to pay?

The most likely tax you will pay will be Capital Gains Tax (CGT) which would be due upon sale. Tax is payable on any gain made on the value of the land from your first point of acquisition to the date of sale.

New Capital Gains Tax rates were announced in the October 2024 budget which stated all CGT would be paid at 18% for basic rate taxpayers, and 24% for higher rate taxpayers.

Will I have to pay VAT on my land sale?

Usually, land is not subject to a VAT charge, however if the land has been opted to tax discussions will be necessary with the buyer to establish their position as to whether the sale is subject to VAT or not.

How can my tax bill be reduced?

There are multiple exemptions and reliefs that can be applied to Capital Gains Tax which, if appropriate, may reduce your gain down to nil.

Annual Allowance – each tax year you are entitled to an exemption (£3,000 in the 2025/26 tax year). This is a minimal saving when considering the values of land sale but, is still worth utilising.

Business Asset Disposal Relief (BADR) – supposing you were to cease trading and sell your business assets, BADR means tax would be payable at a lower rate on all qualifying gains up to £1million. In April 2025 the rate recently increased to 14%, and will increase again in April 2026 to 18%.  Higher rates will apply where you are just selling a business asset but continue to trade.

Gift Hold-Over Relief – in the event that you want to give away your agricultural land or sell it for less than it is worth to help the buyer, gift hold-over could reduce your gain to nil and the person you gave the land to would pay the CGT when they sell it.   

Rollover Relief – providing that you are selling land and want to use all or part of the proceeds to buy another qualifying asset for your business, rollover relief can be claimed which means you won’t pay any tax until you sell the new asset.

 Who should I sell my land to?

If you are selling your land to a developer, there are a few things you need to consider. 

An outright sale of land would mean you are paid instantly, and although you may get less money overall it is a simpler sale and you know what to prepare for.

However, you may wish to enter into an overage agreement with a developer in which they offer you a share of their profits once they have built on your land. It is important to bear in mind these payments would be classed as income and so would be taxed accordingly.

If you are considering selling your business, part of your land or even gifting some to the next generation, we are here to help and advise you of the best way to go about this.