If you are a property developer, then you will be treated as carrying on a trade and will be liable to income tax and national Insurance or corporation tax if you operate through a company on your trading profit. The trading profit is computed after a deduction for all expenses incurred wholly and exclusively in the course of the trade, including the cost of the land.  On the other hand, a property investor is taxed on any gain and pays capital gains tax or corporation tax on chargeable gains.nnMost existing owners of green belt land are likely to be regarded as holding such land as an investment for tax purposes, given that development of such land has not been possible until now. A future sale of such land for development under the Government’s new grey belt rules is therefore likely to be taxed as a chargeable gain arising from your investment.nnHowever, if you held the land as an investment but in connection with the redesignation of your land as grey belt, your intention changes to becoming a developer, the property would be recharacterized for tax purposes as no longer a fixed investment asset but as trading stock.nnFor capital gains tax purposes, you will then be treated as having disposed of the property to yourself for market value and taxed accordingly on that deemed disposal, even though you have not received any cash out of which to fund the tax. However, there is an election for tax purposes that you can make to ‘hold-over’ taxing that gain until the property is sold on to a third party in your capacity as a developer, although that will mean all the gain is eventually taxed as income.