CGT lettings relief — pre and post April 2020 rules
TCGA 1992 s.223B (Finance Act 2020): from 6 April 2020 lettings relief is only available where the landlord was in shared occupancy with the tenants during the letting period. Pre-April 2020: up to £40,000 relief available to any landlord disposing of a property that had been their main residence and was subsequently let — the lesser of (a) PRR amount; (b) £40,000; (c) gain attributable to the letting period. Post-April 2020 restriction: shared occupancy condition requires owner to have been simultaneously living in the property alongside the tenants. The typical buy-to-let landlord who moved out before the tenancy began cannot satisfy this condition.
- Who can still claim post-April 2020: live-in landlords with lodgers (owner lives in the property while lodger also in residence — shared occupancy condition met; lettings relief up to £40,000 available); rent-a-room scheme may also apply to the rental income (tax-free £7,500/year)
- Who cannot claim: buy-to-let landlords who purchased as investment (no main residence period = no PRR and no lettings relief); landlords who lived in the property, then vacated and let on whole-property AST (can claim PRR for occupation period + final 9 months, but no lettings relief from April 2020 for the letting period after vacating)
- Potential saving where shared occupancy met: higher-rate taxpayer with £40,000 lettings relief saves up to £11,200 in CGT (40% × £40,000); additional rate taxpayer: up to £10,000 saving (25% CGT rate from 30 October 2024 Budget applies for additional rate — check current rates); both partners on jointly-owned property each have own £40,000 limit
- Final period exemption: last 9 months of ownership always qualify for PRR regardless of whether landlord in occupation (reduced from 18 months April 2020); 36 months for disabled individuals or those in care homes
Lettings relief calculation and CGT reporting
Calculation order: Step 1 — total gain (proceeds minus cost minus costs of acquisition/disposal minus improvements). Step 2 — PRR (qualified occupation period + final 9 months ÷ total ownership × total gain). Step 3 — lettings relief (where shared occupancy met): lesser of PRR amount; £40,000; gain attributable to letting period. Step 4 — taxable gain: total gain minus PRR minus lettings relief minus annual CGT exempt amount (£3,000 from 2024/25). CGT on residential property (from 30 October 2024 Budget): 18% basic rate; 24% higher/additional rate. CGT reporting: 60-day UK Property Account report required for UK residential property disposals; pay CGT within same 60 days; also include in annual self-assessment return.
- Example (post-April 2020; shared occupancy — live-in landlord; 10-year ownership; 6-year main residence with lodger; gain £120,000): PRR = 6/10 × £120,000 = £72,000; gain attributable to letting = £48,000; lettings relief = lesser of (£72,000 PRR; £40,000 cap; £48,000 letting gain) = £40,000; taxable gain = £120,000 − £72,000 − £40,000 − £3,000 = £5,000; CGT at 24% = £1,200
- Same example without lettings relief: taxable gain = £120,000 − £72,000 − £3,000 = £45,000; CGT at 24% = £10,800 — lettings relief saves £9,600 in this scenario
- Scotland/Wales/NI: CGT is a reserved (UK) tax — same TCGA 1992 rules apply throughout; purchase taxes (LBTT, LTT) are devolved but CGT is not
- 60-day reporting: non-UK residents must report all UK residential property disposals within 60 days of completion regardless of whether CGT is due; HMRC UK Property Account online service