How Private Residence Relief Works
PRR exempts from CGT the proportion of the gain attributable to periods of qualifying occupation as a main residence, plus always the final 9 months of ownership (the deemed occupation period, previously 18 months before April 2020). PRR fraction = (qualifying occupation months + final 9 months), total ownership months, gain = exempt amount. If the property was the main residence for the entire ownership period (minus the final 9 months), the full gain is exempt. For landlords who lived in the property and then let it, only the qualifying occupation and final 9 months are exempt; the letting period is NOT exempt (lettings relief was abolished for whole-property lettings from April 2020). Post-October 2024 CGT rates on residential property: 18% (basic rate band) and 24% (higher rate band).
Main Residence, Genuine Occupation and Election Strategy
PRR requires genuine occupation as a settled home, not a postal address or occasional visits; Goodwin v Curtis [1998] confirmed that brief occupation without the quality of a settled home does not qualify. Where a taxpayer has two or more residences, they can elect which is the main residence under TCGA 1992 s.222(5) within 2 years of first having more than one residence; if no election is made, HMRC determines the main residence from the facts. Election strategy: nominate a rental property as the main residence for a brief period of genuine occupation to crystallise the final 9-month exemption, entirely lawful where actual occupation occurs. Retain all evidence of genuine occupation: utility bills, mail, bank statements, GP registration, and council tax records.
Periods of Absence Treated as Occupation
TCGA 1992 s.223 treats certain absence periods as qualifying occupation: (a) Any reason; up to 3 years in total over the entire ownership, provided the property was actually occupied as the main residence immediately before AND after the absence; if the property was let during the absence and never re-occupied, this exemption does NOT apply; (b) Employment abroad, any period during which the taxpayer lived in job-related accommodation outside the UK counts as occupation (unlimited); must re-occupy after; (c) UK employment preventing occupation, up to 4 years of absence for UK employment that prevents occupation counts as qualifying; must re-occupy after. The final 9-month period is always exempt and does not reduce these absence allowances.
Lettings Relief Post-April 2020 and the 60-Day Reporting Deadline
Lettings relief was restricted by Finance Act 2020 for disposals from 6 April 2020: it is now only available where the landlord was in shared occupation of the property with the tenant at the same time, letting a room while living in the rest of the property (lodger arrangement). Full-property letting no longer qualifies regardless of prior occupation. For disposals before April 2020, the old lettings relief (up to £40,000 per owner) still applies to the pre-April 2020 gain. Since 6 April 2020, UK residents must report and pay CGT on UK residential property disposals within 60 days of completion via HMRC's online service. The annual exempt amount is £3,000 from 2024/25. If the entire gain is covered by PRR, the 60-day report is not required, but retain documentary evidence of the PRR basis.