At a glance

If you make a profit (a 'gain') when you sell your own home, that gain is tax-free if you can meet all the conditions to claim CGT Private Residence Relief (PRR).

This relief can be very straightforward if you: own one home at a time and have the required evidence to show that you meet all the qualifying conditions.

A claim for relief can be complicated if you own multiple properties or are developing properties.

In order to claim PRR:

• You must own the freehold or leasehold of the property.

It must have been:

• Occupied as a dwelling: i.e.fully habitable as a home.
• Occupied as your only or main private residence.

The relief does not apply to commercial property.

The relief covers:

• The building and a permitted area of up to 0.5 of a hectare (1.25 acres) of gardens and grounds including outbuildings.
• The area may be extended in very, exceptional cases, where larger grounds are in keeping with the property.

Permitted absences

• Provided that you have lived in the property as your home certain absences are permitted, for example, you can live in another home or work elsewhere abroad.
• When such an absence is permitted within the rules you are treated as if you lived in the property as your main residence throughout these periods.
• The last nine months (18 months for disposals before 6 April 2020) of ownership are covered by PRR if you meet the main conditions, even if you no longer live there, a longer period is given in certain cases, see Private Residence Relief. 

If you own two or more homes

• You need to make an election to HM Revenue & Customs (HMRC) if you have two homes that qualify for PRR in order to say which home is your main private residence.
• It is possible to 'flip' homes to avoid CGT by making elections at strategic times.

Restrictions on the gain

• If the property has been jointly owned, let or in mixed business use a proportion of the gain may be chargeable to CGT.

• If all or part of the property is used exclusively for commercial use as a business e.g. as an office, surgery, workshop, hotel etc. relief is restricted in part and an apportionment is made. Your gain is usually time apportioned and the period for which it was used commercially is not covered by the relief.

• If the home has been let a further relief, CGT letting relief could be claimed up until 5 April 2020 provided that the property was occupied as an only or main residence at some time during ownership but see Private Residence Relief for changes to the relief from 6 April 2020. 

Restrictions

No relief is given if:

• A dwelling is acquired wholly or partly for the purpose of realising a gain. e.g you are a property developer.
• All or part of a house is used exclusively for the purposes of a business. If part of a house is used exclusively for the purposes of a business, the gain eligible for relief must be apportioned on a just and reasonable basis.

For gains accruing after 5 April 2015, no PRR is available in respect of:

• A non-UK resident if not present in their UK home for 90 days in a tax year.
• A UK resident if claiming relief for an overseas home and is not present in that home for 90 days in a tax year.

There are special rules for married couples

• Married couples and civil partners are treated as if they are just one individual. They are only entitled to designate one property at a time as a private residence. 
• Transfers of residences between married couples and civil partnerships have special rules which effectively back-date periods of ownership. Used carefully these may create useful tax planning opportunities.
• There are special rules on divorce that may extend PRR where a property is held in trust, subject to a court order.

What's new in legislation?

From 6 April 2020 see Private Residence Relief

Other recent changes:

• From 6 July 2016.
• From 6 April 2016.
• From 6 April 2015.
• From 6 April 2014.

Review of recent tax tribunal decisions and precedents

See: Private Residence Relief

Useful guides on this topic

Private Residence Relief
What is Private Residence relief (PRR)? What are the qualifying conditions? Can you claim relief on two homes? How do you claim PRR? Can you claim PRR if you develop your garden?