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HMRC internal manual

Capital Gains Manual

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HM Revenue & Customs
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Private residence relief: final period exemption: cannot exceed gain

If the dwelling house is used for part or all of the final part of the period of ownership as its owners only or main residence, that period may qualify for relief both as a period of residence and as part of the exempt final period. This period should only be counted once in computing relief. This is illustrated below.

Example 1

An individual acquires a dwelling house in May 2001 and uses it as her only or main residence from May 2001 to June 2003 and again from August 2006 to June 2008. The house is sold in November 2010 and a gain of £50,000 before private residence relief arises.

The relief is computed as follows -

  • Period of ownership May 2001 - November 2010 = 115 months
  • Period of only or main residence

May 2001 - June 2003 = 26 months

and August 2006 - June 2008 = 35 months

  • Final period exemption

July 2008 - November 2010 = 29 months

The relief is 26 + 35 + 29 x £50,000 = £39,131

                            115

The chargeable gain is £10,869 before annual exempt amount.

Example 2

An individual acquires a dwelling house in May 2001 and uses it as her only or main residence from May 2001 to June 2003 and again from August 2006 to June 2013. The house is sold in November 2014 and a gain of £150,000 before private residence relief arises. (TCGA92/S225E does not apply).

The relief is computed as follows -

  • Period of ownership May 2001 - November 2015 = 163 months
  • Period of only or main residence

May 2001 - June 2003 = 26 months

and August 2006 - June 2013 = 83 months

  • Final period exemption

July 2013 - November 2014 = 17 months

The relief is 26 + 83 + 17 x £150,000 = £115,951

                            163

The chargeable gain is £34,049 before annual exempt amount.