Selling a Second Property You Once Lived In: CGT, Private Residence Relief and Lettings Relief (2026/27)
How Capital Gains Tax applies when you sell a property you once lived in and later let out — private residence relief, the final 9 months, and today's much-restricted lettings relief.
The scenario: living in it, then letting it out, then selling
A common situation: someone buys a property, lives in it as their main home for several years, then moves out — perhaps relocating for work, moving in with a partner, or buying a larger family home — and lets the original property out to tenants for a period before eventually selling it. Understanding how Capital Gains Tax applies to the eventual sale requires working through both Private Residence Relief and, since 2020, the far more limited Lettings Relief.
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Open Capital Gains Tax calculatorPrivate Residence Relief and the final 9 months
The core relief exempts the proportion of any gain relating to periods when the property was genuinely your only or main residence. Crucially, the law also treats the final 9 months of ownership as automatically qualifying, even if you had already moved out and the property was let to tenants during that time — this recognises that selling a property can take time, and prevents someone from losing relief simply because completion happened to fall slightly after they moved out.
Lettings Relief: a shadow of its former self
Before April 2020, Lettings Relief provided up to £40,000 of additional relief (£80,000 for a jointly owning couple) covering gains relating to a period a former main home was let out — a valuable relief widely used by "accidental landlords" who let out a home they had previously lived in. From April 2020, this was severely restricted: Lettings Relief now only applies where the owner was living in the property at the same time as the tenant (shared occupancy, such as letting a room to a lodger while still living there). For the far more common scenario of moving out entirely and letting the whole property to independent tenants, no Lettings Relief is available at all under the current rules.
Worked example
Suppose a property was owned for 15 years (180 months) in total:
- Lived in as main residence: first 8 years (96 months)
- Let out to independent tenants (owner not living there): next 6 years and 3 months (75 months)
- Final period before sale, deemed occupation: last 9 months (already included within, or immediately following, the letting period — the final 9 months always count as qualifying regardless of actual use)
Total qualifying period for Private Residence Relief: 96 months (actual occupation) + 9 months (deemed final period) = 105 months out of 180 months total ownership.
Suppose the total gain on sale is £180,000.
- Exempt proportion (Private Residence Relief): 105 ÷ 180 × £180,000 = £105,000
- Taxable proportion: 75 ÷ 180 × £180,000 = £75,000 (representing the period let out, excluding the final 9 months already counted as deemed occupation)
Since the owner did not share occupancy with the tenants during the letting period, no Lettings Relief applies to reduce this £75,000 further.
- Less annual exempt amount (£3,000): £75,000 − £3,000 = £72,000 taxable gain
- At 24% (assuming the gain falls in the higher-rate band for residential property, given the owner's other income): 24% × £72,000 = £17,280 Capital Gains Tax due
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Open Buy-to-Let calculatorReporting and payment deadlines
UK residential property gains subject to CGT must generally be reported and the tax paid within 60 days of completion, using HMRC's dedicated online Capital Gains Tax on UK property service — a much tighter deadline than the usual Self Assessment timetable, and one that catches many "accidental landlords" out if they are not aware of it in advance. The gain must also still be included on the individual's annual Self Assessment return for full reconciliation with the rest of their tax affairs.
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Open Rental Yield calculatorFrequently asked questions
What is Private Residence Relief?
Private Residence Relief exempts from Capital Gains Tax the portion of a gain relating to periods when a property was your only or main home, calculated proportionally against the total period of ownership, plus an automatic final period of deemed occupation even if you were not actually living there at the point of sale.
How long is the final period of deemed occupation?
The final 9 months of ownership are treated as a period of deemed occupation for Private Residence Relief purposes, regardless of whether you were actually living in the property during that time, as long as it qualified as your main residence at some point during your ownership.
What is Lettings Relief and has it been restricted?
Lettings Relief used to give up to £40,000 of additional CGT relief (£80,000 for a couple) for periods a former main home was let out. Since April 2020, it has been drastically restricted — it now only applies where the owner was in shared occupation with the tenant at the same time, which excludes the vast majority of buy-to-let landlords who let out a former home to tenants living there independently.
Does Lettings Relief still help most landlords selling a former home?
No. Because the 2020 restriction requires the owner to have shared occupancy with the tenant, most landlords who moved out entirely and let the whole property to tenants no longer qualify for any Lettings Relief at all on those periods, which was a significant tax increase for this group compared with the pre-2020 rules.
How is the taxable gain calculated when a property was lived in for part of the ownership and let for the rest?
The total gain is apportioned based on the number of months the property was your main residence (plus the automatic final 9 months) versus the number of months it was let out or otherwise not your main residence, with only the 'let out' proportion of the gain potentially subject to CGT.
What CGT rates apply to residential property gains in 2026/27?
Residential property gains are taxed at 18% for gains within the basic rate band and 24% for gains above it, after using the £3,000 annual exempt amount, which is lower than the rates that apply to most other assets for basic-rate taxpayers specifically on residential property.
Do I need to report and pay CGT on a former home within a specific deadline?
Yes. UK residential property CGT must generally be reported and paid within 60 days of completion, using HMRC's dedicated Capital Gains Tax on UK property reporting service, separate from your annual Self Assessment return, though the gain must still be included on your Self Assessment return as well.
Does moving back into the property before selling restore full relief?
No, moving back in only adds a further period of genuine main-residence occupation to the proportion of time you can claim full relief for; it does not retrospectively convert the earlier letting period into a period covered by relief, though it may reduce the proportion of the total gain treated as attributable to the let period going forward.
Can I use both Private Residence Relief and the Capital Gains Tax annual exempt amount?
Yes. Private Residence Relief (for the proportion of the gain relating to genuine occupation, plus the final 9 months) is applied first, and then the remaining taxable gain, if any, benefits from the annual exempt amount (£3,000 for 2026/27) before the remaining amount is taxed at 18% or 24%.
Does the property need to be in the UK to qualify for Private Residence Relief?
No, Private Residence Relief can in principle apply to an overseas property that was genuinely your main residence, though non-UK residents and properties outside the UK involve additional rules and reporting requirements that go beyond the scope of the standard UK main residence exemption.
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