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HMRC internal manual

Capital Gains Manual

Private residence relief: example: sale of dwelling house: land exceeds permitted area

The example at CG65113 was simplified by the fact that there was no non-residential use of the dwelling house. One part of the gain was wholly relieved while the other was wholly chargeable. If there have been periods when the dwelling house has not been its owners only or main residence the computation is a little more complicated.

D acquired a dwelling house with four hectares of land in August 2002 for £150,000. She lived in it until October 2004 as her only residence. In that month she bought a second dwelling house and began to live in it as well. She made a nomination under Section 222(5) in favour of the second residence within the time allowed, see CG64495. In November 2010 she sold her first residence together with its grounds for £400,000.

She agrees with the Valuation Office Agency that the permitted area should be one hectare and that the necessary apportionments should be:-

  2002 2010
Dwelling house and permitted area 130,000 300,000
Remainder 20,000 100,000
  150,000 400,000

her gain is computed as follows:-

    Dwelling house and permitted area Remainder
    £ £
  Disposal proceeds 300,000 100,000
less cost 130,000 20,000
  Gain 170,000 80,000

The gain arising on the land outside the permitted area is chargeable in full but some relief is due on the dwelling house and the permitted area.

Private residence relief

  • Period of ownership Aug 2002 - Nov 2010 = 100 months
  • Period of only or main residence

Aug 2002 - Oct 2004 = 27 months

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

The relief is 27 + 36 x £170,000 = £107,100


The chargeable gain will be £62,900 + £80,000 = £142,900 before annual exempt amount.

If the house had been disposed of on or after 6 April 2014 the final period exemption would be limited to 18 months see CG64985.