Principal Private Residence Relief: CGT on Selling Your Home in 2026/27

When you sell your home, you will usually pay no Capital Gains Tax thanks to Principal Private Residence (PPR) relief -- one of the UK's most valuable tax exemptions. But PPR relief is not automatic, and the rules governing periods of absence, letting, divorce, and partial use create genuine complexity. Understanding these rules is essential if you have ever rented out your home, lived away for work, or own more than one property.

What qualifies as a main residence?

A property qualifies as your main residence if it is a dwelling that you occupy as your only or main home. There is no statutory definition of "main residence" -- HMRC and the courts look at a range of factors:

• Length of time spent at the property.
• Whether the property is furnished and the standard of furnishing.
• Whether correspondence, electoral registration, and bank accounts use the address.
• Connection to the local community (GP, dentist, social life).
• Where family members live.

Simply registering to vote or redirecting post to a property is not sufficient if the facts show you did not genuinely occupy it as a home. HMRC can and does investigate PPR claims, particularly where a property has increased substantially in value over a short period.

The final 9-month rule

Regardless of whether you are living in a property at the time of sale, the last 9 months of ownership are treated as a qualifying period of main residence for PPR purposes. This was reduced from 36 months (pre-April 2014), then 18 months (pre-April 2020), to the current 9 months.

The 9-month rule is designed to help people who have bought a new property but are struggling to sell the old one. Without this rule, any overlap period -- where you have moved into your new home but have not yet sold the old one -- would be a period of absence from the old home, potentially creating a taxable gain.

Periods of absence and PPR

Several categories of absence are treated as qualifying periods of occupation for PPR purposes, provided the property was your main residence immediately before and after the period of absence (with some exceptions):

Job-related absences: Any period during which you had to live away from home for work reasons (for example, living in employer-provided accommodation at a different location) qualifies without any time limit.

Absences of up to 4 years: If you were absent for any reason for a continuous period of up to 4 years, and you occupied the property as your main home before and after the absence, those years qualify. Note that the requirement to reoccupy before and after the absence can be waived for job-related absences.

Absences up to 3 years for any reason: An additional 3-year window of absence for any reason can also qualify, subject to the before-and-after occupation condition.

Partial PPR relief: the calculation

If a property has not been your main residence for the entire period of ownership, only a proportionate part of the gain is exempt. The formula is:

Exempt gain = Total gain x (Qualifying periods + Final 9 months) / Total ownership period

Example: You owned a property for 10 years. You lived in it as your main home for 6 years, then let it out for 4 years. You are now selling.

• Qualifying periods: 6 years (actual occupation) + 9 months (final period)
• Total ownership: 10 years (120 months)
• Qualifying months: 72 + 9 = 81 months
• Exempt fraction: 81/120 = 67.5%
• If total gain is £120,000, exempt gain = £81,000; taxable gain = £39,000

After subtracting the £3,000 AEA, tax would be due on £36,000 at 18% or 24%.

Letting relief -- the post-2020 rules

Before April 2020, letting relief was widely available to landlords who had lived in a property at some point before letting it. Now, letting relief is only available if the owner is in shared occupation with the tenant at the time of letting.

The maximum letting relief remains £40,000 per owner (or the PPR-exempt gain, whichever is lower). But because most landlords do not live alongside their tenants, letting relief is now rarely available in practice.

Divorce, separation and PPR

Since April 2023, the CGT rules for separating couples have been significantly improved:

• Transfers of assets between separating spouses are treated as no gain no loss for up to 3 years after the end of the tax year of separation.
• If a formal court order is in place, the no-gain-no-loss treatment can continue beyond 3 years.
• The leaving spouse can also retain PPR relief on their share of the former matrimonial home for up to 9 months after moving out.

When one spouse stays in the family home and the other receives a deferred interest in the proceeds (common in cases involving young children), the leaving spouse can elect to treat the property as their main residence for the deferred period if they meet certain conditions under the Mesher or Martin order rules.

When a developer buys your home

Some housebuilders and developers offer "part-exchange" schemes, buying existing homes to facilitate new-build sales. PPR relief applies to your gain on the sale of your main home in these transactions just as it would in a normal sale -- provided the home qualifies as your main residence. There is no special restriction simply because the buyer is a developer.