Selling your home: Private Residence Relief and Capital Gains Tax
Published · 6 min read · Figures checked . UK rules and rates change, so check the official sources below before you act.
Most people pay no Capital Gains Tax when they sell the home they live in, because of Private Residence Relief. This guide explains the conditions, the 9 month rule, letting, and the 60 day report.
What Private Residence Relief is and how it works
Capital Gains Tax is a tax on the profit, or gain, you make when you sell something that has risen in value. For most people the home they live in is the largest asset they will ever sell, yet in the usual case no tax is due. That is because of Private Residence Relief, an automatic tax relief that removes the gain on a home that has been your main home throughout your ownership. You do not apply for it and you do not normally need to tell HMRC. It matters mainly when you let the property, used part of it for business, or lived elsewhere for a period. This guide covers England, Scotland, Wales and Northern Ireland, because Capital Gains Tax is a UK-wide tax. It is written for UK residents selling a home in the UK, and it does not cover non-residents, who have extra reporting duties.
When you get full relief
GOV.UK says you get full relief if you have one home and lived in it as your main home for all the time you owned it, you have not let out part of it, you have not used part of it exclusively for business, and the grounds, including buildings, are under 5,000 square metres (HMRC's helpsheet describes this as half a hectare). You also must not have bought the property just to make a gain. A lodger who shares your living space does not count as letting, and occasional office use does not count as business use. HMRC's helpsheet adds that working from home in a room that is also used for non-business purposes does not stop full relief. Married couples and civil partners can only count one property as their main home at any one time, so a couple with two homes needs to decide which one qualifies for each period.
The key rules and figures
- Final period: the last 9 months of ownership always qualify for relief, as long as the home was your main home at some point. This applies even if you had already moved out.
- Disabled people and care home residents may get the final 36 months instead, if they have no other relevant right to a private residence.
- Allowed absences: up to 3 years in total for any reason; up to 4 years in total where distance from work or an employer's requirement stops you living there; any length where all your job duties are abroad; and up to 24 months where you cannot move in to a new home because you cannot sell the old one or it needs work.
- Letting Relief: only where you shared the home with your tenant. It is the lowest of the Private Residence Relief already worked out, £40,000, or the gain linked to the letting.
- Rates in 2026/27: the annual exempt amount is £3,000. Gains are taxed at 18% or 24% for basic rate taxpayers, depending on how much of the basic rate band (£37,700) is used, and at 24% for higher and additional rate taxpayers.
A worked example: a home that was let
The figures below are illustrative only. Suppose someone owned a home for 15 years, lived in it for 7.5 years, then let out the whole property for the remaining 7.5 years before selling at a gain of £120,000. GOV.UK uses this same pattern. The years they lived there count in full, and so do the final 9 months, which is 0.75 of a year. That gives 7.5 + 0.75 = 8.25 years of relief out of 15, which is 55% of the time. Relief is 55% of £120,000, which is £66,000, so £54,000 is chargeable. Taking off the £3,000 annual exempt amount leaves £51,000. If that was taxed entirely at 24%, the tax would be £51,000 x 0.24 = £12,240. Because the whole home was let, Letting Relief is not available here. Real calculations also deduct allowable costs, and the rate depends on other income.
A worked example: letting a room
Now take a different, equally illustrative case. A homeowner lives in their house throughout and lets one bedroom, which is 10% of the home, for part of the time. They sell at a gain of £80,000. Private Residence Relief covers the part they lived in, so 90% of the gain, or £72,000, is relieved, leaving £8,000 linked to the letting. Because they lived in the home at the same time as the tenant, Letting Relief can apply. It is the lowest of £72,000 (the relief already given), £40,000 (the cap) and £8,000 (the gain from the letting), so it is £8,000, and nothing is left chargeable. GOV.UK notes that Letting Relief does not cover any gain made while the home was empty, so a gap in letting can change the result.
Working out the gain and reporting it
Your gain is usually the difference between what you paid for the home and what you sold it for. GOV.UK says you can deduct the costs of buying, selling or improving the property, such as estate agent and solicitor fees and building work like an extension. Routine maintenance such as decorating does not count, and neither does interest on a loan used to buy the home. If tax is due on UK residential property, you must report and pay within 60 days of completing the sale, using a Capital Gains Tax on UK property account online or the paper route, and joint owners each report their own share. UK residents whose total gains are below the tax-free allowance do not need to report online. If you are registered for Self Assessment you must also include the sale in your return. GOV.UK warns that interest and a penalty may apply if you do not report and pay on time.
Common mistakes and where to get free help
A frequent mistake is assuming that a home is always tax free. It can be worth checking whether any part was let, used only for business, or whether a long absence went beyond the allowed periods. Another is missing the 60 day clock, which starts when the sale completes. People also forget to keep records of improvement costs and occupation dates, which are needed to work out the gain. HMRC has a Capital Gains Tax helpline, and its helpsheet HS283 explains the relief in detail. For complex cases, many people use a qualified tax adviser. This guide is general information, not personal advice.
Check before you act
Rates, allowances and deadlines change, and your own facts matter. Please confirm the figures on the official pages linked below before relying on them.
Sources
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