Private Residence Relief (PRR) is one of the most valuable tax reliefs available to individuals in the UK. It can exempt all or part of the gain made on the sale of your home from Capital Gains Tax (CGT). But while the concept seems straightforward, the rules can be complex, especially when the property has not been your only, or full-time, residence throughout ownership.
This article outlines how PRR works, who qualifies, and what you need to consider if you’re selling (or gifting) a property.
What Is Private Residence Relief?
PRR provides relief from CGT when you dispose of a property that has been your main or only residence during your period of ownership. In many cases, this means that the entire gain on sale is exempt.
To qualify, you must:
- Own the property;
- Have lived in it as your main home (not just visited);
- Not have let it out (other than under permitted lettings relief);
- Not have used it wholly for business purposes.
How Much Relief Can You Get?
If the property has been your only or main residence throughout your entire period of ownership, any capital gain arising from a disposal will typically be fully exempt from CGT.
Where the property has not been your main residence throughout the full period of ownership, the gain is apportioned based on:
- The period it was your main residence;
- Plus the final nine months of ownership (which qualifies automatically, even if you no longer live there).
For example:
If you owned a house for 10 years and lived in it as your main home for 6 years, then rented it out for 4 years before selling it, you could be entitled to relief for 6 years plus 9 months, meaning 69 months out of 120 months (10 years) would be exempt.
The remaining gain would be chargeable and may be subject to lettings relief if applicable.
Lettings Relief
Lettings relief used to be a generous exemption, but since April 2020 it is now only available if you were in shared occupation with your tenant. In most cases, this means the scope of lettings relief is very limited.
If available, it can exempt up to £40,000 of gain (or £80,000 for couples) attributable to the let portion of the property.
Nomination of Main Residence
If you own more than one property, you may choose which one should be treated as your main residence for PRR purposes by making a nomination to HMRC. This must be done within two years of acquiring the second property.
The choice does not have to be based on where you spend most of your time—you simply need to demonstrate some level of occupation and interest.
The rules can be complex, and so professional advice should be sought in this respect.
Gifting a Property
Gifting a property to a family member (e.g. your adult children) still counts as a disposal for CGT purposes, and the same PRR rules apply. If the property was your main home throughout, PRR may exempt the gain. But if it was not, a CGT charge could arise—even if no money changes hands.
This is particularly relevant in lifetime giving or estate planning contexts.
Pitfalls to Watch For
- Gaps in occupation: Time abroad or in a second home can reduce the exempt period.
- Delays in moving in: If you buy a house but do not move in promptly, this period may not qualify.
- Business use: Using part of your home exclusively for work (e.g. a photography studio) could restrict relief.
- Non-residents: Since 6 April 2015, non-residents are within the CGT net for UK property and can only claim PRR for periods where they met the UK day-count and presence conditions.
Planning Ahead
Private Residence Relief is generous but not automatic. Clear records, well-timed nominations, and careful planning around lettings, gifting, or emigration can all make a difference.
If you are considering selling or gifting a property, particularly one that has not always been your main home, professional advice can help you:
- Calculate potential gains;
- Identify available reliefs;
- Plan the disposal for optimal tax efficiency.
Reporting Residential Property Gains
You need to report the sale and any CGT due within 60 days of the completion date if the sale was completed on or after 27 October 2021. This can be done through HMRC’s online system.
When reporting the gain, you will need to provide details such as the property address, date of acquisition, date of sale, purchase price, sale price, and costs related to the purchase and sale.
Where the return is not filed within 60 days of the date of completion, an automatic late filing penalty of £100 will apply.
More information on reporting residential property gains can be found here: 60-days to Report Residential Property Gains – A Reminder.
How We Can Help
For more information on this or to speak to one of our experts, please use our enquiry form or email us at hello@dixcartuk.com.
At Dixcart, we work with individuals, families and trustees to navigate property disposals and ensure that available reliefs are claimed. If you are unsure whether PRR applies to your situation, or want to plan a future disposal, our private client team would be happy to help.
