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This publication is available at https://www.gov.uk/government/publications/private-residence-relief-hs283-self-assessment-helpsheet/hs283-private-residence-relief-2017--2
This helpsheet explains the relief available on the disposal of your private residence. But it’s only an introduction. If you’re in any doubt about your circumstances you should ask your tax adviser. We will also be pleased to help. You can also consult our Capital Gains Tax Manual which explains the rules in more detail.
This helpsheet will help you to fill in the Capital Gains Tax summary pages of your tax return.
1. How the relief works
If you dispose of:
- a dwelling house (which can include a house, flat, houseboat or fixed caravan) which is your home
- part of a dwelling house which is your home
- part of the garden attached to your home you would normally have to pay Capital Gains Tax on any gain you make
However, you’ll be entitled to full relief where all the following conditions are met:
- the ‘dwelling house’ has been your ‘only’ or ‘main residence’ throughout your ‘period of ownership’
- you’ve not been absent, other than for an allowed period of absence or because you’ve been living in ‘job-related accommodation’, during your ‘period of ownership’
- the ‘garden or grounds’ including the buildings on them are not greater than the ‘permitted area’
- no part of your home has been used exclusively for business purposes during your period of ownership
The ‘Definition of terms’ are explained below. If you meet all of these conditions, you won’t have to pay Capital Gains Tax on the disposal. You won’t need to complete the Capital Gains Tax summary pages of your tax return if you’ve made no other disposals or chargeable gains and don’t wish to make any capital gains claims or elections. (See page TRG 5 of the tax return guide)
If not all of the conditions are met, you may still get partial relief under certain circumstances and you’ll need to complete the Capital Gains Tax summary pages of your tax return. This helpsheet describes the circumstances when you may get relief and explains how much relief you can deduct from any gain to calculate the chargeable gain.
Even if you meet all of these conditions, you won’t get Private Residence Relief if:
- you dispose of all or part of your garden after you’ve disposed of your home
- you acquire a dwelling house and/or spend money on it in order to realise a gain on its disposal
For example, you may have bought the house to sell it quickly at a profit or, if you were a tenant, you may have bought out the freehold in order to increase your profit on sale. In this case, you’ll need to provide details on your tax return.
What if you’ve made a loss on the disposal instead of a gain
If you make a loss on the disposal of your home and you would have got Private Residence Relief if you had made a gain, your loss won’t be an allowable loss and you won’t be able to offset it against any gains you’ve made. If you would have got partial relief, part of your loss won’t be allowable and that part should be calculated in the same way as you would have calculated the partial relief if you had made a gain.
2. Who qualifies for relief
Any individual is entitled to the relief on any gain arising on the disposal of his or her only or main residence. This is provided that, in calculating the amount of the gain that would be a chargeable gain if the relief did not exist, no account would have to be taken of any Gift Hold-Over Relief obtained under Section 260 of the Taxation of Chargeable Gains Act 1992 by any person for an earlier disposal. Special transitional rules that may allow some Private Residence Relief to apply where Gift Hold-Over Relief is obtained for a transfer which was made before 10 December 2003. Relief under these transitional provisions must be claimed (see ‘How to claim relief’ below). Trustees of settled property and personal representatives may claim relief in some circumstances, as explained below. Companies are not entitled to relief.
You’re entitled to relief if you own the freehold of your home or if you’re a tenant owning a lease. You’re also entitled to relief if you jointly own the freehold or lease with someone else.
3. Capital Gains Tax for non-residents on UK residential property
From 6 April 2015 if you sell (or dispose of) the whole or part of an interest in a UK residential property when non-resident you must tell HMRC within 30 days of conveyance and you may have to pay Capital Gains Tax on any gains you make. You can find more information on this in the GOV.UK guide Capital Gains Tax for non-residents: UK residential property.
4. Definition of terms
Your dwelling house may be a single building, for example, a detached house. It may be more than 1 building, for example, a house with a detached garage. Or it may be part of a building, for example, a flat. If your home includes more than 1 building, for example, if it has several outbuildings, any relief available for your dwelling house might not extend to all of the outbuildings.
4.1 Example 1
Your home consists of a house, a detached garage and a granny flat near the house, half an acre (0.203 hectares) of garden and a summer house at the end of the garden. Your dwelling house is the house together with the garage and the granny flat, but excluding the summer house.
Deciding which buildings make up your dwelling house is only important if your home has a garden or grounds larger than the permitted area, see below. If you’ve a single lodger, the rooms occupied by the lodger qualify for relief. If you’ve more than 1 lodger, or if you let part or all of your home at any time in your period of ownership, the let parts won’t qualify for Private Residence Relief. However, you may be entitled to claim ‘Letting Relief’ which is explained below. If part of your dwelling house is used exclusively for a trade or business, that part won’t qualify for relief.
4.2 Example 2
Your house consists of a shop with your living accommodation above. You’re only entitled to relief for the living accommodation. If you sell the house, you should split any gain between the gain on the shop, which may be chargeable, and the gain on the living accommodation, which will attract relief.
If you live in a fixed caravan or houseboat, you’re entitled to relief in the same way as if you lived in a house or a flat. If your home is outside the United Kingdom (UK) you may still qualify for relief.
Only or main residence
If you live in, as your home, 2 or more houses, you can only have 1 main residence at a time for Private Residence Relief. You can nominate which residence is to be treated as your main residence for any period. Your nomination must be made within 2 years of the date you first have a particular combination of residences. If there is a change in your combination of residences, a new 2-year period begins. If you don’t make a nomination, the question of which is your main residence will be determined on the facts.
4.3 Example 3
In June 1992 you bought a house which became your only home. In May 2015 you bought another house which you occupied as a second home. You can nominate the second home or your original home to be your main residence. Your nomination must be made by May 2017.
If you’re married or in a civil partnership and you’re not separated from your spouse or civil partner, you can have only 1 main residence between you. If, when you married or registered as civil partners, you each owned a residence and you’ve continued to use both residences, you can nominate jointly which is to be the main residence, and the 2-year period for doing so begins on the date of marriage or registration as civil partners.
If you’re separated, each of you may have a different only or main residence and each may be entitled to relief on any gains arising on the disposal of the residence(s).
From 6 April 2015 additional rules apply to nominations in favour of a residence located in a jurisdiction in which you’re not tax resident. So if you’re a tax resident of the UK and have a residence in another country that you’ve previously nominated or wish to nominate as your main residence the additional rules need to be considered. Guidance is included in the Capital Gains Tax Manual.
Period of ownership
Your period of ownership begins on the date you first acquired the dwelling house, or on 31 March 1982 if that is later. It ends when you dispose of it. The final 18 months of your period of ownership always qualify for relief, regardless of how you use the property in that time, as long as the dwelling house has been your only or main residence at some point.
If you’re a disabled person or a resident in a care home the final 36 months of ownership may qualify for relief if you don’t have any other relevant right in relation to a private residence. Further detail is available in the Capital Gains Tax Manual, see CG64986.
If the dwelling house has not always been your only or main residence, you’ll need to split the gain. When calculating the proportion of the gain eligible for relief, you multiply the gain by a fraction equal to the periods of occupation (including the final 18 or 36 months where appropriate) divided by the period of ownership (both periods starting at 31 March 1982 if the house was owned before that date). You don’t introduce valuations of the property at the dates of changes of use.
4.4 Example 4
You bought your house in January 2005 and sold it in January 2017. You lived in the property as your only or main residence apart from 18 months in 2006 and 2007 when you lived in a different house. So the house qualifies for relief for 126 out of the 144 months you owned it. A proportion of any gain you make from the disposal amounting to 126/144 will qualify for relief. If you had moved out of the house at some time after July 2015 instead of in 2006 and 2007, your relief would not be restricted. If you had bought the house before 31 March 1982, the calculation above would begin from 31 March 1982 and not from when you bought the house.
4.5 Example 5
You bought your house in February 1981 and lived in it as your only home until March 1995. You then moved to a new house which became your main home but retained the first house as a second home. It was not let. You sold the first house in March 2017.
You’re entitled to relief for the period when it was your only home (counting from 31 March 1982), from March 1982 to March 1995, 156 months, plus the final 18 months of ownership, a total of 174 months. The period of ownership from 31 March 1982 to March 2017 is 420 months. So relief is due in the fraction 174/420.
Period of absence
Some periods when you were not using the house as your only or main residence will still qualify for relief. These should be treated as periods of actual occupation when you’re calculating the fraction of any gain that qualifies for relief. If for up to a period of 12 months you don’t occupy your new home when you acquire it because you’re not able to sell your old home, or you need to carry out refurbishment, you can treat up to the first 12 months as if the house had been your only or main residence in that period. In exceptional circumstances, we may allow you to treat a longer period (up to a total of 2 years) in the same way. The same treatment applies when you buy land to build a house on.
4.6 Example 6
You bought a house in January 1998 but it needed major refurbishment and you could not move in until January 1999. Subsequently it was your only or main residence until you sold it in June 2016, you’re entitled to full relief.
Certain other periods of absence from your dwelling house may be treated as periods of residence if both before and after the period there’s a time when the dwelling house is your only or main residence.
For sales or disposals prior to 6 April 2015 there was an additional requirement that during the period of absence you had no other dwelling house eligible for relief.
If you’ve another dwelling house eligible for relief, for example a house or flat which you bought or rented as your home while absent, you’ll need to make a nomination in favour of the original dwelling house, if you want the period of absence to be treated as a period of residence at that house, see ‘Only or main residence’ above.
The qualifying periods of absence are:
a. absences for whatever reason, totalling not more than 3 years in all
b. absences during which you’re in employment and all your duties are carried on outside the United Kingdom (UK)
c. absences totalling not more than 4 years when
- the distance from your place of work prevents you living at home, or
- your employer requires you to work away from home in order to do your job effectively
You’ll keep the exemption for absences b. and c. if you cannot return to your dwelling house afterwards because your existing job requires you to work away again. The absences at b. and c. will also apply if the employment was that of your spouse or civil partner.
4.7 Example 7
You bought a house in 1984 and used it as your only or main residence. In 1985 your employer required you to work abroad and you did not come back to the house until 1990. You lived in the house again as your only or main residence until you sold it in 2016. You’re entitled to full relief.
If you live in accommodation that is job-related and you also own a dwelling house that you intend to occupy as your only or main residence, the dwelling house you intend to occupy is treated as actually being occupied by you as a residence during the period in which you intend to occupy it, even if you never actually live there. This means that you may nominate that residence as your only or main residence and get relief on the whole or a part of the gain. Please see the paragraph headed ‘Only or main residence’ above. If your intention to live in the dwelling house ends, then the dwelling house is no longer treated as your residence.
Accommodation is job-related if it’s exempt from Income Tax for the reasons set out in Helpsheet 202 Living accommodation
This extension of Private Residence Relief also applies if you’re self-employed. The job-related accommodation must be provided by another person under the terms of a contract that requires you to live in the property and carry on a particular trade.
Garden or grounds
You’re entitled to relief if you dispose of land that you occupy as your garden or grounds, up to the permitted area, at the time of your disposal. The garden or grounds includes the buildings standing on that land. So a building that isn’t part of your dwelling house can still qualify for relief if it’s within the permitted area of garden or grounds.
The garden or grounds will include any enclosed land surrounding or attached to your dwelling house and serving chiefly for ornament or recreation. However, not all land you hold with your dwelling house is treated as the garden or grounds of that residence. You’re not entitled to relief for land let or used for a business, for example, surrounding farm land. Similarly, land which at the date of disposal has been fenced or divided off from your garden for development, or has been developed or is in the course of development (for example, excavations under way for foundations, roads, services, and so on) won’t qualify.
If your garden and grounds don’t exceed half a hectare (which is a little over 1 acre), you’re entitled to relief for all of it. Look again at Example 1 above. The summer house was not part of the dwelling house. But the grounds don’t exceed half a hectare and so the summer house, which stands in the grounds, will still attract relief.
If your garden and grounds exceed half a hectare, you may not be entitled to relief for all of it. The area for which you’re entitled to relief is called the permitted area. It consists of the area that is required for the reasonable enjoyment of your dwelling house as a home. The size and character of your dwelling house must be taken into account.
If your garden and grounds exceed half a hectare, and you’ve disposed of all or part of the garden and grounds, you should:
enter details of the disposal and gain on pages CG 2 to CG 4
explain in the ‘Any other information’ box, box 54, on page CG 3 of the Capital Gains Tax summary pages why you think, if appropriate, all or part is exempt from Capital Gains Tax
We may ask for further details in these cases and the District Valuer (DV) will be asked to determine the size and location of the permitted area.
5. Letting Relief
If you only get partial relief because you’ve let some or all of your dwelling house as residential accommodation, you may be entitled to a further relief. This further relief is due where:
you sell a dwelling house which is, or has been, your only or main residence, and
part or all of it has at some time in your period of ownership been let as residential accommodation
The amount of relief is the lowest of:
the amount of Private Residence Relief already calculated
the amount of any chargeable gain you make because of the letting
5.1 Example 8
You let 60% of your house as residential accommodation and occupied 40% as your home. You made a gain of £60,000 when you disposed of the property. You’re entitled to Private Residence Relief for 40% of the gain – £24,000. Your remaining gain is £36,000 and it all results from the letting. The lowest of the 3 limits set out above is the amount of Private Residence Relief and so you’re entitled to additional Letting Relief of £24,000. Your chargeable gain will be £12,000.
5.2 Example 9
You bought your house in December 2003 and sold it in December 2016 owning it for 13 years. You lived in the property as your only or main residence from December 2003 to December 2009 (6 years). It was then let as residential accommodation from January 2010 to December 2012 (3 years) and then empty until sold at a gain of £150,000. You’re entitled to Private Residence Relief for 7 1∕2 years (6 years of residence plus final 18 months) out of 13 years. This part of the gain is £86,539 (7 1∕2/13 x £150,000). Your remaining gain is £63,461.
The lowest of the 3 limits set out above is the gain by reason of the letting £34,615 (3∕13 x £150,000) so you are entitled to further Letting Relief of £34,615. Your chargeable gain will be £28,846. There are additional examples in theCapital Gains Tax Manual at CG64737.
6. Calculating the gain where only partial relief is due
if part of your home is used exclusively for business purposes, or you’ve let part of your home, split the gain between the business part or the let part, which is chargeable, and your own living accommodation, which is exempt
if you’ve not always lived in your home, other than allowed periods of absence, multiply the total gain by a fraction equal to the period you actually lived in the dwelling house plus any allowed periods of absence plus any part of the final 18 months not covered by actual occupation or allowed period of absence, divided by the period of ownership – that part of the gain will be exempt
if you’ve had more than 1 home, decide whether or not the home you’ve sold has ever been your only home (a question of fact) or has been nominated at any time as your main home – multiply the total gain by a fraction representing the period(s) during which the dwelling house was your only or main home plus the final 18 months, divided by the period of ownership – that part of the gain will be exempt
if you’ve let your home, do the calculations as shown under the heading ‘Letting Relief’ above and add the lowest figure to the relief you’re already getting for your home as calculated above – see the further examples in CG64737 where the letting period and final period of exemption (18 or 36 months) overlap
if you’re selling land which formed part of your garden (provided that you’re not selling the land after selling your home, and provided the land has not been divided off from your garden or developed in some way, in which case no relief is due) you’ll need to decide if any or all of the land sold is within the permitted area – if all of the land is within the permitted area, the gain will be exempt – if only part of the land is within the permitted area, then you’ll have to split the gain between the land which is inside the permitted area, which is exempt, and the land outside, which is chargeable.
7. Residence provided for a dependent relative
In addition to the relief that may be due on disposal of your own residence, you may also be entitled to relief when you dispose of a residence which you’ve provided for a dependent relative. This relief only applies if you acquired the residence before 6 April 1988 and certain additional conditions were met.
The conditions for relief are detailed in the Capital Gains Tax Manual, see CG65550.
8. Private Residence Relief on the disposal of settled property
The trustees of a settlement may claim relief (see ‘How to claim relief’ below) if they dispose of the only or main residence of a person entitled to occupy that residence under the terms of the settlement. This is provided that, in calculating the amount of the gain arising on the disposal that would be a chargeable gain if the relief did not exist, no account would have to be taken of any Gift Hold-Over Relief obtained under Section 260 of the Taxation of Chargeable Gains Act 1992 by any person for any earlier disposal.
Special transitional rules that may allow some Private Residence Relief to be claimed by the trustees apply where Gift Hold-Over Relief is obtained for a transfer to the trustees which was made before 10 December 2003. Ask us if you require more information. For advice on how this relates to your own circumstances, consult your tax adviser.
9. Personal representatives
Personal representatives who dispose of the only or main residence of one or more legatees during the administration period may claim relief (see ‘How to claim relief’ below) if the legatee or legatees in question would be entitled to at least 75% of the proceeds of the disposal of the property (assuming that none of the proceeds are needed to meet any liabilities of the deceased person’s estate). Ask us if you require more information. For advice on how this relates to your own circumstances, consult your tax adviser.
10. How to claim relief
In your computation of the gain on any relevant disposal included with the Capital Gains Tax summary pages CG 1 to CG 4, either in box 54 on page CG 3 or in your attached computation, write that ‘Private Residence Relief is claimed’ and state the amount of relief claimed. In addition enter code PRR (where lettings relief does not apply) or LET (where lettings relief does apply) in box 8.
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