What happened to letting relief for CGT on property sales?

Full answer

Letting relief was a Capital Gains Tax relief that allowed homeowners to reduce their taxable gain when selling a property that had at some point been let to tenants. It was available alongside Private Residence Relief (PRR). Pre-April 2020 rules (old regime) Letting relief was available when: -- The property was the owner's main residence at some point -- Part of the property was let as residential accommodation The relief was the lower of: -- The PRR gain attributable to the let period -- GBP 40,000 -- The amount of the PRR itself For a couple jointly owning a property, each could claim up to GBP 40,000 -- so up to GBP 80,000 total. This was one of the most generous CGT reliefs available to private individuals. Post-April 2020 rules (current regime) From 6 April 2020, letting relief is only available if the homeowner was in shared occupancy with the tenant during the letting period -- meaning the owner must have been living in the same property as the tenant at the same time the tenant was there. This effectively eliminated the relief for the vast majority of landlords who let a former home after moving out. The old use case -- "I lived there, then moved out, then let it, then sold it" -- no longer qualifies. Private Residence Relief (PRR) -- unchanged PRR continues to apply to any period the property was the owner's only or main residence. The final 9 months of ownership (reduced from 18 months in April 2020) is also always exempt from CGT, even if the owner is not living there during those last 9 months. This helps if you are struggling to sell a former home. Letting period gain is now fully taxable (subject to PRR) If you let a property after moving out, the proportion of the total gain attributable to the letting period (minus the final 9-month exemption) is now fully taxable. Example: owned for 10 years, lived there 4 years, let for 6 years. Let period = 60% of gain. Taxable: 60% of total gain minus final 9 months. The absence of letting relief significantly increases the CGT liability. Planning point If you need to move out of your home temporarily and plan to return, nominating the property as your main residence during your absence (within the 3-year absence rules) may preserve PRR and avoid the need for letting relief.

Try the calculator