Pillar Guide · Updated May 2026
UK CGT Private Residence Relief: Main-Home Exemption, Final 9 Months, Letting Relief Post-2020, Elections and Worked Gains for 2026/27
Private Residence Relief (PRR) is the single most valuable Capital Gains Tax relief in the UK system. Under Section 222 of the Taxation of Chargeable Gains Act 1992, a property that has been your only or main residence throughout your ownership is fully exempt from CGT on disposal — no calculation, no submission, no tax. The full exemption is what makes UK home ownership the dominant long-term wealth-building vehicle for typical households. Where the property was your main home for only PART of the ownership period (e.g., you let it out later, owned a second home, lived abroad), PRR exempts a time-apportioned share of the gain — the final 9 months are always treated as occupation, and various periods of absence still count as qualifying occupation under tightly defined conditions. This pillar guide walks through the full PRR framework for 2026/27: the full-exemption rule, the final 9 months (extended to 36 months for disabled and care-home residents), the substantial 2020 reform that abolished Letting Relief except for shared occupation, the married-couple single-residence rule, the 2-year election window for second properties, the 0.5 hectare garden/grounds cap, permitted absences for employment and other reasons, the Rent-a-Room compatibility, mixed-use property treatment, and a fully-worked partial-PRR calculation showing how the gain apportionment produces real-world CGT liability for accidental landlords and former-home sellers.
What is Private Residence Relief?
Private Residence Relief (PRR) is a Capital Gains Tax relief codified in Section 222 TCGA 1992. It exempts the gain on the disposal of a property that has been your only or main residence during the period of ownership. Where the property qualifies as your main home throughout, the entire gain is exempt — no CGT, no reporting, no submission. The relief is automatic for sole-residence disposals.
Where the property qualifies as your main home for only part of the ownership period, PRR exempts a time-apportioned fraction of the gain. The fraction is calculated month-by-month, with qualifying occupation months (plus the final 9 months) divided by total ownership months. The remaining portion is the chargeable gain on which CGT is paid at residential property rates: 18% within the basic-rate band, 24% above the higher-rate threshold (rates effective from 30 October 2024 Budget).
PRR sits at the heart of UK personal CGT planning. Without PRR, UK homeowners would face large CGT bills on selling their primary residences — the £100k-£500k of typical owner-occupied gains over a 10- 30 year ownership would otherwise produce £15k-£100k+ of tax. PRR eliminates this entirely for genuine main-home disposals and provides proportional relief for partial main-home use. It is the single most valuable individual tax relief in the UK personal tax code by aggregate value of relief granted.
Full Exemption Rule
Where a property has been your only or main residence throughout the entire period of ownership, PRR exempts 100% of the gain on disposal. There is no cap on the value of the exemption — gains of £50k, £500k or £5m on a genuine main-home sale all receive full PRR.
Conditions for full exemption: (a) the property must have been a "dwelling-house" — a building used as a residence rather than purely commercially; (b) you must have OCCUPIED it as your main residence throughout the ownership period; (c) you must have OWNED it during that time; (d) the disposal must be of the dwelling-house and qualifying garden/grounds.
Practical timing. The very small periods at the start (between contract exchange and completion, typically 4-12 weeks during which you do not yet live in it) and at the end (between vacating and completion) are covered by HMRC's pragmatic concessions where the property was substantively your main home. Where you bought a new-build off-plan and waited 18 months for construction, the period before completion is generally NOT counted as your main residence because you could not have occupied it — this creates a small chargeable portion of the gain in many new-build flips, partially mitigated by the final 9 months. For typical owner-occupiers who buy a completed home, move straight in, and sell when moving out, the full exemption applies cleanly.
The Final 9 Months
The FINAL 9 MONTHS of ownership are always treated as a period of qualifying occupation for PRR purposes, provided the property was your main residence at some earlier point. You need not actually live in the property during those final 9 months — they qualify automatically.
History of the final period. Originally 36 months from PRR's inception in 1965, reduced to 18 months in Finance Act 2014, reduced again to 9 months in Finance Act 2020. The purpose: allow homeowners practical breathing room between moving out of an old home and selling it, without losing PRR coverage on the overlap. Successive governments have shortened the period as a small revenue-raiser, but 9 months remains long enough to cover typical sale-and-relocation timing.
The final 36 months still applies where the owner (or their spouse/civil partner) is disabled within the meaning of the Equality Act 2010, or has moved into a long-term care home. This protects vulnerable owners who cannot realistically arrange a sale within 9 months of moving out. Conditions must be met at the time of disposal — see HMRC manual CG65030.
Practical implication. The final 9 months can substantially mitigate partial-PRR liability where a former home was let after the owner moved out. Example: 10 years ownership, lived 7 years as main home, let 3 years, sold immediately on tenant exit. Final 9 months covers part of the let period. Qualifying months = 84 (occupation) + 9 (final period) = 93 out of 120 total = 77.5% PRR. If gain was £100k, only £22,500 is chargeable to CGT.
Letting Relief Post-April 2020
Letting Relief was substantially abolished by Finance Act 2020 with effect from 6 April 2020. The pre-April-2020 regime provided additional CGT relief on the disposal of a former main residence that had been let out, capped at the LOWER of: (a) the PRR amount; (b) the gain attributable to the letting period; or (c) £40,000 per owner. For a jointly-owned couple, the cap was £80,000 — a substantial reduction in tax on accidental-landlord disposals.
Post-April 2020, Letting Relief applies only where the owner SHARED occupation with the tenant. Shared occupation means a lodger or co-resident arrangement — the owner lived in the same dwelling as the tenant during the let period. Standard buy-to-let or HMO conversion of a former main home (where the owner moved out and rented the whole property) no longer qualifies for Letting Relief at all. The £40,000 cap still applies where shared occupation qualifies.
The change was a major adverse reform for accidental landlords. A typical pre-2020 calculation: bought £200k, sold £400k after 10 years (5 lived, 5 let), gain £200k. PRR exempts £100k (5/10) + £15k (final 18 months pre-April-2020) = £115k. Letting Relief: lower of £85k taxable portion, £115k PRR, or £40,000 = £40,000 additional exempt. Final taxable £45,000. Post-April-2020 same facts (with 9-month final period): PRR exempts £100k + £7.5k = £107.5k. Letting Relief: £0 (no shared occupation). Taxable: £92,500 — more than double the pre-reform position.
Married/Civil-Partner Single Residence Rule
A married couple or civil partners who live together can have only ONE main residence between them for CGT purposes — even where the spouses own different properties. This applies whether properties are owned jointly or solely by one partner. The rule is in Section 222(6) TCGA 1992.
If a couple owns two properties (e.g., a London flat and a Cornwall cottage), they must nominate which one is the main residence. The nomination must be made jointly within 2 years of the second property being acquired (or of the marriage/CP formation if later). The election can be varied later by joint notice. The chosen property does not have to be the one used most — strategic elections can shift the relief to the property with the largest impending gain.
For separating couples, Section 225B TCGA 1992 provides transitional relief. After separation but before divorce/dissolution, each spouse can continue to treat the marital home as their main residence for PRR purposes for a defined period — typically up to the date of decree absolute. This protects spouses from losing PRR mid-divorce. Specific extensions apply where one spouse continues to live in the marital home while the divorce is pending; HMRC manual CG65356 onwards covers detail. Divorcing couples should obtain specific advice — the rules are technical and the tax stakes are high.
The 2-Year PRR Election
When you acquire a SECOND residence (in addition to an existing main residence), you have 2 YEARS from the date of acquisition to elect which property is to be treated as your main residence for PRR purposes under Section 222(5) TCGA 1992. The election is made in writing to HMRC.
The chosen residence does not need to be the one where you spend most time — you can elect either, provided both genuinely qualify as residences (i.e., not purely investments). The 2-year clock restarts each time the combination of residences changes: acquiring a new property, disposing of one, getting married (which combines spouse residences for the joint test).
Strategic election flipping. Because PRR includes the final 9 months automatically, briefly electing a second property as main residence before sale can shift relief and capture the 9-month tail. Example: you own a London flat (main home, lived since 2010) and bought a Cornwall cottage in 2020 as a second home. In 2025 you sell the cottage. By electing the cottage as main residence for one week in 2023 (within the 2-year window if you reset it, e.g., by acquiring a different second property), and reverting to London immediately, you potentially gain PRR on that one week + the final 9 months of the cottage ownership. This "flipping" technique has been challenged by HMRC and is tightly fact-specific; specialist advice is essential before implementing.
Failure to elect within 2 years. If no election is made, HMRC will determine the main residence by factual analysis of actual occupation, council tax registration, utility bills, GP registration, school addresses for children, etc. The factual default usually disadvantages someone with a genuine second property — careful documentation supports a position, but absence of election typically means the relief lands where HMRC says it lands rather than where the taxpayer wanted.
0.5 Hectare Garden and Grounds
Under Section 222(2) TCGA 1992, garden and grounds qualifying for PRR are limited to 0.5 HECTARES (1.24 acres) including the area on which the house itself stands. This is the automatic limit — applied without question by HMRC for any dwelling within standard suburban/urban proportions.
Larger grounds may still qualify if HMRC accepts they are "required for the reasonable enjoyment of the dwelling-house as a residence" given its size and character. A stately home or large country house can justify several hectares of qualifying grounds. The character test is fact-specific and decisions are HMRC discretion subject to appeal. Recent tribunal cases (e.g., Phillips, Henderson) have produced inconsistent results.
Where grounds exceed the accepted limit, the gain on the excess is fully chargeable to CGT. Strategic implications: where someone owns a house with 2 hectares of land, structuring the disposal carefully matters. A direct sale of house + all land triggers CGT on the excess. Selling part of the land separately to a developer or neighbouring landowner before the house sale may produce a chargeable gain on the land disposal but preserve PRR on the house + retained 0.5ha. Conversely, development potential on land can render PRR much more complex. For any disposal involving land beyond 0.5 hectares, take specialist tax advice before committing to a structure.
Periods of Absence
Under Section 223 TCGA 1992, certain periods when you were not occupying your main residence still count as qualifying occupation for PRR — provided you actually occupied the property as your main residence both BEFORE and AFTER the absence. The main permitted absences:
- Any reason — up to 3 years aggregate: travel, sabbatical, family circumstance, any reason. The 3 years can be split across multiple non-consecutive absences.
- Employment requiring you to live elsewhere — up to 4 years aggregate: work secondment to a different UK or overseas location. Must be required by the employer.
- Employment abroad with all duties performed abroad — unlimited: full-time overseas employment with no UK duties. No time limit. Common for international workers and expats who retain UK property.
Each absence must be sandwiched between periods of actual main-residence occupation. Limited exceptions apply where the employer required relocation after the absence began (so the owner could not return). HMRC manual CG65040 onwards covers detailed conditions.
Failure to return. If you never return to occupy the property as your main residence after the absence (e.g., you sold it directly from the tenant), the absence does not qualify and the period becomes a non-qualifying letting period. Limited exceptions exist where the failure was genuinely beyond your control. Documentation matters — employment contracts, return-to-UK plans, GP registration changes all help establish the intent to return where this becomes a tribunal dispute.
Rent-a-Room vs Full Letting
The Rent-a-Room scheme allows you to receive up to £7,500/year (£3,750 if shared with another resident on the same property) of rental income from a lodger sharing your main home, free of income tax. Crucially, taking lodgers under Rent-a-Room does NOT disturb your PRR — the property remains your main residence throughout, and the lodger arrangement counts as shared occupation.
Full letting is different. If you move out and rent the whole property (or rent rooms to tenants where you no longer reside), the property transitions from main residence to investment property for PRR purposes. The let period (excluding any final 9 months) becomes non-qualifying, producing a taxable proportion of the gain on eventual sale. Post-April 2020 there is no Letting Relief either, unless you returned to shared occupation during the let period.
The CGT efficiency of Rent-a-Room is substantial. A lodger paying £600/month (£7,200/year) generates fully tax-free income while preserving 100% PRR on the eventual home sale. The same property generating £600/month from a full tenant where the owner has moved out creates a taxable rental property AND erodes PRR proportionally. Strategic Rent-a-Room is one of the most CGT-efficient ways to monetise spare bedrooms in a main home, particularly attractive for empty-nesters and live-alone homeowners with high-value properties. The scheme is opt-in via Self Assessment box 50/52 each year you wish to use it.
Mixed-Use Properties
A mixed-use property — e.g., a shop with a flat above, where the owner lives in the flat and runs the shop — qualifies for PRR only on the residential portion. The gain on disposal must be apportioned between the residential dwelling-house and the commercial premises, typically on a floor-area or open-market-value basis (whichever HMRC accepts as fair for the specific property).
Working example. Bought £200,000 in 2010, sold £400,000 in 2025. Floor area 60% residential, 40% commercial. PRR applies to 60% × £200k gain = £120k exempt. Remaining 40% × £200k = £80,000 chargeable gain. CGT at commercial property rates (10% basic / 20% higher pre-October-2024; raised to 18% / 24% post-October-2024 to align with residential — check current rates). Annual exempt amount £3,000 (2025/26) reduces chargeable amount. Net tax £14k-£19k depending on marginal rate.
Home office and exclusive business use. Where part of a residential home is used EXCLUSIVELY for business — a separate office room used only for the business with no other use — that portion is excluded from PRR. Where the home office is also used for personal purposes (e.g., desk in a bedroom, dining table doubles as workspace), PRR is preserved fully. Most self-employed working-from-home arrangements preserve PRR because exclusive use is rare. Specialist advice is essential where significant parts of the home are used exclusively for business and a future disposal is contemplated.
Worked Partial-PRR Calculation
Scenario. Bought a flat in March 2008 for £200,000. Lived in it as main home until April 2016 (96 months). Moved out to a new family home, rented the flat to a single tenant (no shared occupation) from April 2016 to April 2024 (96 months). Sold March 2025 for £350,000 (a further 11 months ownership after the tenant left, including 9 months final period).
Total ownership. March 2008 to March 2025 = 17 years = 204 months.
Gain. £350,000 - £200,000 = £150,000 (ignore allowable improvement costs for simplicity — in practice deduct stamp duty, survey, conveyancing on purchase, and improvement capex on the property, and conveyancing/agent fees on sale).
Qualifying months. 96 (actual occupation March 2008 to April 2016) + 9 (final period) = 105 months.
PRR exempt portion. £150,000 × 105/204 = £77,206.
Chargeable gain before allowances. £150,000 - £77,206 = £72,794. Letting Relief: £0 (no shared occupation during let period post-April-2020).
Less annual exempt amount. £3,000 (2025/26) → taxable £69,794.
CGT on residential property at 24% higher rate(post- October 2024): £69,794 × 24% = £16,751. (At basic-rate 18% it would be £12,563; effective rate depends on the taxpayer's total income.)
Reporting. Disposal must be reported via 60-day CGT on UK property return at gov.uk/report-and-pay-your-capital-gains-tax within 60 days of completion. Provisional tax must be paid within the same 60-day window, with the final position confirmed via the Self Assessment tax return for the year. Late returns incur penalties of £100 + £10/day from 3 months. Documentation needed: original purchase completion statement, all enhancement-expenditure receipts, sale completion statement, evidence of dates of actual occupation (council tax, GP, utility bills).