If you let out your home
You may have to pay Capital Gains Tax if you’ve let out your home to a tenant. You are not considered to be letting out your home if either:
- you have a lodger who shares living space with you
- your children or parents live with you and pay you rent or housekeeping
How much you pay depends on how long you lived in your home.
Work out how much tax you have to pay
You’ll pay tax on your ‘chargeable gain’. This is your gain minus any Private Residence Relief you’re eligible for.
You get full relief for:
- the years you lived in the home
- the last 9 months you owned the home - even if you were not living there at the time
If you sold the property between 6 April 2014 and 6 April 2020, you get relief for the last 18 months you owned it.
If you only own one home and you’re disabled, in long-term residential care or sold the property before 6 April 2014 you get full relief for the last 36 months you owned it.
Example You make a gain of £120,000 when you sell your home, which you owned for 15 years. You lived in the whole property for 7.5 years, then you let it out for 7.5 years.
You get Private Residence Relief for the time you lived there (7.5 years). You also get relief for the last 9 months you owned the property, even though you were not living in it.
This means you get Private Residence Relief for 8.25 of the years (55% of the time) you owned the property.
You get Private Residence Relief on the same proportion (55%) of your gain. This means you will not pay tax on £66,000 of the gain.
The remaining 45% (£54,000) of the gain not covered by Private Residence Relief is your chargeable gain.
If you only let out part of your home
You’ll need to work out what proportion of your home you lived in. You only get Private Residence Relief on this proportion of your gain.
Claim Letting Relief
If you lived in your home at the same time as your tenants, you may qualify for Letting Relief on gains you make when you sell the property.
You can get the lowest of the following:
- the same amount you got in Private Residence Relief
- the same amount as the chargeable gain you made while letting out part of your home
Letting Relief does not cover any proportion of the chargeable gain you make while your home is empty.
Example You rent out a large bedroom to a tenant. The bedroom amounts to 10% of your home.
You make a chargeable gain of £75,000 when you sell your home. As 10% of your house was let out, you only get private residence relief for £67,500 (90% of the total gain).
However, as the remaining gain of £7,500 relates to the bedroom that was rented out you’re also entitled to Letting Relief of £7,500.
This means you would pay no tax.
There are other rules that may affect the amount of Capital Gains Tax you need to pay.
If you’re not sure how the rules apply to you, call the Capital Gains Tax helpline.