An at a glance freeview guide to Capital Gains Tax (CGT) relief on the disposal of your own home.

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 absenses

  • 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 absense is permitted within the rules you are treated as if you lived in the property as your main residence throughout these periods.
  • The last 9 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 (subscriber guide) 

If you own two or more homes

  • You need to make an election to HM Revenue & Customs (HMRC) if you have two homes which 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 was been let a further relief: CGT letting relief can be claimed provided that the property was occupied as an only or main residence at some time during ownership.

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, 

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 which may extend PRR where a property is held in trust, subject to a court order.

More information

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

What's new?

What's new in legislation?

For proposals from 6 April 2020

Recent changes

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

What's new: review of recent tax tribunal decisions and precidents

See: Private Residence Relief (subscriber guide)

Tax Tips

Private Residence relief claims (or the lack of them) are regularly investigated by HM Revenue & Customs (HMRC).

The rules for this tax relief may become extremely complicated if you are:

  • Frequently buying and selling property.
  • Making a business of buying and selling property (developing property for a profit).
  • Purchased a residence that was unhabitable.
  • Lived in property for a very short time.
  • Have let or sub-letted your home.
  • Have used all or part of your home as a business.
  • Jointly own the property.
  • Move into a care home.

You need to review the conditions for the relief and if any part of your gain on disposal is not covered by the relief notify HMRC of your 'charegability to tax'. You will then be asked to complete a tax return.

Tax Tips: elections and evidence

  • If you own two or more properties and fail to make an election to nominate one property as a main residence HMRC may decide the matter for you, based on the facts of the case.
  • A property must be a "residence" in order to make a residence election. 
  • If you own or occupy a single property no election is possible.
  • The onus is on you to prove that have met the qualifying conditions to make a claim.

See: Private Residence Relief (subscriber guide) for answers to Tax FAQs, a summary of the essential requirements in terms of evidence and planinng points.

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