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HMRC internal manual

Capital Gains Manual

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HM Revenue & Customs
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Private residence relief: computation of relief: general rule

At its simplest, the amount of relief available is computed by dividing the period in which the property was used as its owners only or main residence, together with the final period of ownership, see CG64985+, by the total period of ownership.

Example 1

An individual acquires a dwelling house in January 2000 for £100,000. It is his only or main residence from January 2003 to January 2007. The dwelling house is sold in January 2010 for £250,000.

The gain before relief is

    £
     
  Disposal proceeds 250,000
Less Cost 100,000
  Gain 150,000

PRIVATE RESIDENCE RELIEF

Period of ownership January 2000 - January 2010 = 120 months

Period of only or main residence

January 2003 - January 2007 = 48 months

Final period allowed by TCGA92/S223 (2) = 36 months

The relief is 48 + 36 x £150,000 = £105,000

                       120

The chargeable gain will be £45,000 before annual exempt amount.

Example 2

The facts are as in example 1 but the disposal is in January 2015, then the position would be:

PRIVATE RESIDENCE RELIEF

Period of ownership January 2000 - January 2015 = 180 months

Period of only or main residence

January 2003 - January 2007 = 48 months

Final period allowed by TCGA92/S223 (2) = 18 months

The relief is 48 + 18 x £150,000 = £55,000

                      180