Private Residence Relief (PRR): How to Save Capital Gains Tax When Selling Your Home

aafra9
Aug 21
4 min read

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When you sell your home in the UK, you may have to pay Capital Gains Tax (CGT) on the profit you make. However, in many cases, you can claim Private Residence Relief (PRR), which reduces or even eliminates your tax liability.

At PKPI Chartered Accountants, we help homeowners, landlords, and property investors understand how PRR works and how to maximise this relief.

What is Private Residence Relief?

You will not pay Capital Gains Tax when you sell (or dispose of) your home if all the following apply:

You have one home and you’ve lived in it as your main residence throughout ownership.
You have not let part of it out (except for having a lodger).
You have not used any part of it exclusively for business purposes.
The grounds, including buildings, are less than 5,000 square metres (1 acre).
You did not buy the home solely to make a gain.

If all these apply, Private Residence Residence is automatic you don’t even need to claim it.

⚠️ Married couples and civil partners can only count one property as their main home at any one time.

How do you work out your capital gain if you don’t qualify for full Private Residence Relief (PRR)?

If you don’t qualify for full Private Residential Relief, you may still need to pay CGT.

Your gain is usually:

Sale price (or market value) = Purchase price – Allowable costs

Allowable costs include:

Estate agent and solicitor fees
Improvement works (e.g., an extension)

But you cannot deduct:

Mortgage interest
Normal maintenance (e.g., decorating)

If you lived abroad, you only pay UK tax on gains made since 5 April 2015.

Can you still claim Private Residence Relief if you were living away from your home?

Yes, you still qualify for Private Residential Relief during certain periods, even if you weren’t living in the property. These include:

The last 9 months of ownership (always exempt).
Up to 3 years for any reason.
Up to 4 years if required to live away for work in the UK.
Unlimited if required to work abroad.

Special rules apply if you are disabled or in long-term residential care, you may get up to 36 months relief at the end.

How do you nominate a main residence for Private Residence Relief (PRR) ?

If you own more than one property, you must nominate one home as your main residence.

You must do this within 2 years of acquiring the new property.
You cannot claim PRR on another home during that period (apart from the final 9 months rule).

For overseas homes, you must have lived there for at least 90 days per year to nominate it.

What happens to Private Residence Relief (PRR) if you let out your home?

If you let out your property, the rules are stricter:

You always get PRR for the period you lived there plus the last 9 months.
For the period it was let, you may have a chargeable gain.
If you had tenants while also living in the property, you may qualify for Letting Relief (up to £40,000).

Example:

You owned a house for 15 years.

Lived in it for 7.5 years, let it for 7.5 years.
Gain = £120,000.
PRR applies for 8.25 years (55%).
£66,000 exempt, £54,000 taxable.

If you only let part of your home (e.g., renting out one room), PRR applies proportionately, and Letting Relief may wipe out the remaining gain.

Case Study – PKPI Chartered Accountants

A client in Slough sold their home after living there for 10 years and letting it out for 5 years.

Sale price: £500,000
Purchase price: £300,000
Gain = £200,000

Relief applied:

10 years of residence + 9 months final exemption = ~11 years
11/15 of the gain = £146,666 exempt
Remaining £53,334 subject to CGT

Through correct application of Private Residential Relief and Letting Relief, we reduced the client’s tax bill by more than £100,000.

If your home was your only or main residence, you will likely pay no CGT.
Even if you moved out or let the property, partial relief can still apply.
Planning and nominating your main residence can save you thousands in tax.

📞 How PKPI Chartered Accountants Can Help

Private Residence Releif can be complicated, especially if you have multiple properties, have lived abroad, or let out your home.

At PKPI Chartered Accountants,

Calculate your exact CGT liability.
Maximise available reliefs.
Ensure HMRC reporting within the 60-day deadline.

👉 Contact us today to discuss your property tax planning and make sure you don’t pay more than necessary.

Frequently Asked Questions (FAQs)

1. Do I always get Private Residence Relief when I sell my home?

Not always. You qualify if it was your only or main residence throughout ownership. If you let it out or used part for business, you may only get partial relief.

2. How long do I need to live in a property to get Private Residence Relief?

There’s no fixed minimum, but HMRC expects the property to have been your genuine main residence. Evidence such as utility bills, council tax, and voter registration helps prove this.

3. What if I move out before selling my home?

The last 9 months of ownership are always exempt, even if you’ve moved elsewhere. In some cases (work relocation or living abroad), you may qualify for longer relief.

4. Can I claim PRR on more than one property?

No. At any time, you can only have one main residence. However, if you own multiple homes, you can nominate one within 2 years. PKPI Chartered Accountants can guide you in making the best tax-efficient choice.

5. What if I let out my property?

You’ll still get PRR for the time you lived there, plus the final 9 months. The let period may be taxable, but Letting Relief (up to £40,000) could reduce the gain.

6. Do I need to report the sale to HMRC?

Yes, if there is any CGT due. You must report and pay within 60 days of completion. If you qualify for full PRR, no report is needed. PKPI Chartered Accountants can handle this reporting for you.

Key Takeaways