5. If you let out your home
You may have to pay Capital Gains Tax if you’ve let out your home. How much you pay depends on how long you lived in it.
Having a single lodger doesn’t count as letting out 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 18 months you owned the home - even if you weren’t living there at the time
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 before you sold your home.
Example You make a gain of £120,000 when you sell your home, which you owned for 12 years. You lived in the whole property for 6 years, then you let it out in full for 6 years.
You get Private Residence Relief for the time you lived there (6 years). You also get relief for the last 18 months you owned the property, even though you weren’t living in it.
This means you get Private Residence Relief for 7.5 of the years (62.5% of the time) you owned the property.
You get Private Residence Relief on the same proportion (62.5%) of your gain. This means you won’t pay tax on £75,000 of the gain.
The remaining 37.5% (£45,000) of the gain not covered by Private Residence Relief is your chargeable gain.
If you qualify for Private Residence Relief and have a chargeable gain, you may also qualify for Letting Relief. This means you’ll pay less or no tax.
Claim Letting Relief
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 from letting your home
Letting Relief doesn’t cover any proportion of the chargeable gain you make while your home is empty.
Example Because you made a chargeable gain of £45,000 while letting your property (and got £75,000 in Private Residence Relief) you can claim £40,000 in Letting Relief. This means you’ll pay Capital Gains Tax on £5,000.
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.
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.
You may also be entitled to Lettings Relief.