What Is Private Residence Relief and Who Qualifies for It

What is Private Residence Relief

Private Residence Relief is a tax exemption that reduces the amount of Capital Gains Tax you pay when you sell your main home. It applies when the property has been your only or main residence for all or part of the time you owned it.

Essentially, PRR ensures that people who sell the home they live in are not taxed on the gain in its value over time. You only start paying Capital Gains Tax when a property is not your main home or when part of it has been used for business or rental purposes.

The relief covers both the period you lived in the property and, in many cases, an additional nine months at the end of ownership, even if you have moved out before selling.

When Private Residence Relief applies

You may qualify for PRR if:

The property has been your main or only home.

You have lived in it as your residence throughout the period of ownership (or part of it).

The grounds, including the garden, do not exceed 5,000 square metres (roughly 1.24 acres).

You did not buy the property purely to make a profit.

You do not have to claim PRR if you meet all the conditions, as it is applied automatically when you report the sale to HMRC.

How Private Residence Relief works

When you sell your home, you calculate the gain as the difference between the sale price and the original purchase price (after deducting any allowable costs such as legal fees or improvements).

Private Residence Relief then reduces the taxable portion of that gain. If the property was your main home for the entire period of ownership, you will not pay any Capital Gains Tax.

If it was your main home for only part of the time, the gain is divided between the periods you lived there and those when you did not. You only pay CGT on the portion that relates to the time it was not your main residence.

Example

You bought a property in 2010 for £200,000 and sold it in 2025 for £400,000, making a £200,000 gain.

You lived in it for ten years but rented it out for five years before selling.

Your total ownership period is 15 years. PRR covers the ten years you lived there plus the final nine months, which HMRC treats as a tax-free period even though you no longer lived there.

This means roughly 11 out of 15 years are exempt. You pay Capital Gains Tax only on 4/15 of the £200,000 gain (£53,333). The rest is tax-free.

The final nine months rule

If you move out of your home before selling it, you can still claim PRR for the final nine months of ownership.

This rule recognises that it can take time to sell a property after moving out. The nine-month exemption applies even if you buy and move into another home during that period.

Special rules extend this period to 36 months if you move into care or if you are disabled.

Letting part of your home

If you let out part of your home while still living there, PRR will cover the portion you occupy as your residence. However, you may have to pay CGT on the part of the property you rent out.

Before April 2020, landlords could claim Letting Relief to reduce their tax, but this now only applies if the landlord lives in the property at the same time as the tenant.

Example

If you rent out your spare room while still living in the house, PRR will cover your own share, and Letting Relief may apply to the rented part. If you move out completely and rent out the entire property, only the time you lived there (plus the final nine months) will be exempt.

Using part of your home for business

If you use part of your home exclusively for business, such as running an office or workshop, PRR will not apply to that part of the property.

For example, if 20% of your home is used solely for business, 20% of the gain may be subject to Capital Gains Tax.

If the space is used for both personal and business purposes (for example, a study used for work and leisure), PRR will still apply to the whole property.

Owning more than one home

If you own more than one property, you can only claim PRR on one main residence at a time. You can nominate which property should qualify by notifying HMRC within two years of acquiring the second property.

This election allows flexibility, particularly for people who divide their time between a city flat and a country home.

HMRC will consider factors such as where you spend most of your time, where your family lives, and where you are registered to vote when determining which home qualifies as your main residence if you do not make an election.

When Private Residence Relief does not apply

You will not qualify for PRR if:

The property has never been your main home.

It was bought purely to renovate and sell at a profit.

You have used part of it exclusively for business.

The garden or grounds exceed 5,000 square metres (unless HMRC agrees it is reasonable).

You let it out entirely for a long period without living there.

In these cases, you may still be able to reduce your tax liability through other allowances or reliefs, such as deducting improvement costs or claiming Letting Relief where applicable.

How to claim Private Residence Relief

PRR is applied automatically if you meet the qualifying criteria. However, if you need to report a gain to HMRC, you can do this:

Through your Self Assessment tax return if you regularly file one.

Through HMRC’s Capital Gains Tax on UK Property service if you are selling a residential property that is not fully exempt.

You must report and pay any Capital Gains Tax due within 60 days of completion.

Keep records of:

Purchase and sale dates

Property purchase price and sale price

Periods of occupation and letting

Costs of improvements and selling expenses

These records will support your claim if HMRC requests evidence.

Final thoughts

Private Residence Relief is one of the most valuable tax reliefs available to homeowners, often making the sale of a main home completely tax-free. To qualify, you must have lived in the property as your main residence for at least part of the time you owned it.

Even if you have rented it out or moved before selling, PRR and the nine-month rule can still provide substantial savings. However, for mixed-use or multiple-property situations, the rules can become complex.

A property accountant or tax adviser can help ensure that you claim the correct relief and avoid paying unnecessary Capital Gains Tax when selling your home.