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    TaxKilnUK tax guidance
    TaxKilnUK tax guidance

    Private Residence Relief + Letting Relief (PRR)

    Private Residence Relief (PRR) EXEMPTS the gain on disposal of a property that has been the individual's ONLY OR MAIN private residence. **Time-apportionment for mixed-use periods**: PRR = Total gain × (Periods of occupation / Total period of ownership). **Last 9 MONTHS** of ownership auto-qualifies for PRR even if not occupied at sale time (REDUCED from 18 months pre-April 2020 + from 36 months pre-April 2014). **Exception**: 36 MONTHS final-period exemption for owners who are DISABLED or moved into LONG-TERM RESIDENTIAL CARE + have no other property claiming PRR. **LETTING RELIEF, effectively ABOLISHED from 6 April 2020**: previously gave up to £40,000 per owner (£80,000 per couple) where former main residence had been let; from April 2020, only available where owner + tenant in SHARED OCCUPATION simultaneously. Pre-April 2020 Letting Relief accruals + any pre-April 2020 relief in respect of pre-April 2020 periods is LOST + cannot be carried forward.

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    What this relief is, in plain English

    PRR is one of the UK's most valuable tax reliefs, entirely exempts the gain on sale of a person's main home. For owner-occupied properties throughout the period of ownership, the gain is 100% CGT-free regardless of size. For partially-occupied or partially-let properties, the relief is TIME-APPORTIONED based on the period of occupation vs total ownership. The final-period exemption rule (last 9 months of ownership auto-qualifies even if not occupied) catches the typical 'house on market while you move out' scenario. The 36-month exemption for disability / care home scenarios is preserved + valuable for genuine moves into long-term care. Letting Relief was historically a significant CGT relief for former-main-home BTL scenarios, up to £40,000 per owner of additional relief on top of PRR. The April 2020 reform restricted it to SHARED OCCUPANCY situations only, effectively abolishing it for typical owner-moved-out-let-to-tenant scenarios. The transitional treatment was harsh, pre-April 2020 accruals not preserved. The lasting impact: former-home BTL disposals from 2020 onwards face higher effective CGT than was the case under the pre-April 2020 regime. Planning around PRR + Letting Relief: time-apportion ownership carefully (occupation periods, final-9-months, disability-36-months); document genuine occupation via electoral roll + council tax + utilities; structure any letting + return-to-occupation pattern to maximise PRR proportion; consider whether shared-occupancy letting (Rent-a-Room + post-April 2020 Letting Relief) is feasible for owners staying in the property.

    How it works

    PRR time-apportionment formula

    PRR = Total gain × (Periods of OCCUPATION ÷ Total period of ownership). Occupation periods include actual occupation + auto-qualifying final 9 months. For 100% owner-occupation throughout: PRR = 100% of gain (entirely CGT-free).

    Last 9 months auto-qualifies (standard)

    Final 9 months of ownership auto-qualifies for PRR even if not occupied. Reduced from 18 months pre-April 2020; from 36 months pre-April 2014. Useful for sellers transitioning between homes, typical 'on market' period covered.

    Last 36 months exemption, disability + care home

    Where owner is DISABLED or moves into LONG-TERM RESIDENTIAL CARE + has no other PRR-claimed property, the 36-month exemption applies instead of standard 9 months. Generous + protects vulnerable owners from CGT on time-to-sell delays.

    Letting Relief, shared-occupancy only post-April 2020

    Up to £40,000 per owner (£80,000 per couple) where landlord + tenant SHARED OCCUPATION of the dwelling simultaneously. Effectively abolished for owner-moved-out-let-to-tenant scenarios from 6 April 2020. Pre-April 2020 accruals also lost (no grandfathering).

    Who qualifies

    Interactions with other reliefs

    60-Day CGT Reporting

    PRR-fully-exempt sales: no CGT, no 60-day return needed. Partial PRR with taxable gain: 60-day report required on taxable portion.

    Annual Exempt Amount (£3,000)

    After PRR + Letting Relief deductions, AEA further reduces taxable gain. Joint owners each get own AEA against own share of gain.

    Rent-a-Room

    Rent-a-Room scheme (income side, £7,500 threshold) + post-April 2020 Letting Relief (CGT side, shared-occupancy) often apply together for main-home lodger scenarios. Different mechanics, complementary.

    FHL Abolition (April 2025)

    Ex-FHLs disposed post-April 2025: PRR + Letting Relief mechanics standard. BADR no longer available (FHL abolition removed BADR access). Disposal subject to standard residential CGT 18%/24% rates + 60-day reporting.

    Common mistakes + audit triggers

    Worked example

    Olusegun, Birmingham - Owner of former-main-home BTL flat moved to family home in different area (2025/26)

    Olusegun bought flat in Birmingham 2014 for £150,000 (£3,500 SDLT + £1,200 legal). Lived there as main home 2014-2018 (4 years). Met partner, moved into their home 2018, let the Birmingham flat 2018-2025 (7 years). Sold June 2025 for £290,000 (£2,800 estate agent + £1,200 legal). Higher-rate taxpayer.

    Calculation: **Gain calculation:** Sale proceeds: £290,000 - £2,800 - £1,200 = £286,000. Cost basis: £150,000 + £3,500 + £1,200 = £154,700. Gross gain: £286,000 - £154,700 = **£131,300**. **PRR calculation:** Total ownership: 11 years (2014-2025). Occupation periods: 4 years actual + 9 months auto = 4.75 years. PRR fraction: 4.75/11 = 43.2%. PRR exempt: 43.2% × £131,300 = **£56,722**. **Letting Relief: NOT available** (post-April 2020 only shared-occupancy; Olusegun moved out + let to tenant separately). **Taxable gain:** £131,300 - £56,722 = £74,578 - £3,000 AEA = **£71,578 taxable**. CGT at higher rate 24%: **£17,179**. **60-day reporting:** Report + pay £17,179 within 60 days of June 2025 completion. **Counterfactual (pre-April 2020 rules):** Under old rules: PRR + 18 months final exemption (4 + 1.5 = 5.5/11 = 50%) + Letting Relief up to £40,000. - Gain £131,300; PRR 50% = £65,650; Letting Relief on remaining £65,650 portion = up to £40,000. - Taxable: £131,300 - £65,650 - £40,000 = £25,650; less old AEA £12,300 (pre-2020) = £13,350. - CGT at 28% (residential, pre-2024 rate): £3,738. **Post-April 2020 cost vs pre-April 2020 cost: £17,179 - £3,738 = £13,441 additional CGT** on the same scenario. The April 2020 reforms materially increased CGT for former-main-home BTL disposals.

    Statute reference: Taxation of Chargeable Gains Act 1992 ss.222-226 (PRR + Letting Relief). HMRC manual: CG64200 onwards.

    Frequently asked questions

    What happens if I miss the Self Assessment deadline?+
    The Self Assessment deadline is 31 January (online filing) for the previous tax year. Miss it and HMRC apply an automatic £100 penalty. Beyond that: £10 per day from 3 months late (capped at £900), 5% of tax due at 6 months late, and another 5% at 12 months late, under Schedule 55 of the Taxes Management Act 1970. If you have a genuine reason (serious illness, bereavement, technical issue with HMRC's systems) you can appeal with evidence; HMRC accepts reasonable excuse appeals in most genuine cases.
    Do I need an accountant or can I file Self Assessment myself?+
    Legally you can file Self Assessment yourself via gov.uk for free, most simple sole-trader returns (single income source, basic expenses) are realistic to self-file. An accountant adds real value when: your trading profit is above £40,000 (extraction-strategy decisions matter), you have multiple income streams (PAYE + self-employment + property + dividends), you've crossed the £90,000 VAT threshold, you're considering incorporation, or you have an HMRC enquiry. Expect to pay £400-£1,500/year for a typical sole-trader accountant; the cost is itself a deductible expense.
    How do payments on account work?+
    When your Self Assessment tax bill exceeds £1,000 for the first time, HMRC requires payments on account toward NEXT year's tax. Half the current bill is due 31 January (alongside the current bill); the other half is due 31 July. So your first January after crossing the threshold can hit with a double-bill: last year's balance + first payment on account. Adjust via Form SA303 if you expect next year's income to drop substantially. Payments on account don't apply if more than 80% of your tax is collected via PAYE.
    I owned my home 12 years + lived in it 8 years + let it 4 years, what's my PRR?+
    Time-apportioned. PRR covers: 8 years actual occupation + last 9 months auto-qualifying = 8.75 years out of 12. PRR fraction: 8.75/12 = 72.9%. Apply to total gain. **Example**: total gain £200,000. PRR exempt: 72.9% × £200,000 = £145,800. TAXABLE GAIN: £200,000 - £145,800 = £54,200. Less Annual Exempt Amount £3,000 (2025/26) = £51,200 taxable. At higher rate 24%: £12,288 CGT due. 60-day reporting applies (substantial gain). Letting Relief NOT available (post-April 2020, no shared occupancy).
    I'm moving into a care home + need to sell my home, what extra PRR do I get?+
    36-MONTH final-period exemption applies (not just the standard 9 months) where: (1) you're DISABLED or moving into LONG-TERM RESIDENTIAL CARE; (2) you have NO OTHER property on which PRR is being claimed. This 36-month period is the original pre-2014 rule, preserved for genuine disability / care scenarios. Useful for owners who move into care + then take time to sell the former home, the final 36 months of ownership remain PRR-exempt rather than just 9 months. Combined with actual occupation periods + Annual Exempt Amount, often eliminates CGT entirely on the disposal. Document care-home admission + property non-use carefully, HMRC will scrutinise the genuine-care scenario.
    What happened to Letting Relief in April 2020?+
    **Effectively abolished for the typical scenario.** Pre-April 2020: Letting Relief gave up to £40,000 per owner (£80,000 per couple) where a former main residence had been let. Post-April 2020: ONLY available where landlord + tenant in SHARED OCCUPATION (both occupy the dwelling simultaneously). The pre-April 2020 mechanism, covering scenarios where someone moved out of their main home + let it to tenants, was the typical use case. Now it's gone for that scenario. Many former-main-home BTL situations from 2020 onwards face the full taxable gain on the non-PRR portion. **Crucially**: ANY Letting Relief accrued before April 2020 in respect of pre-April 2020 letting periods is also LOST. The transitional position was harsh, no grandfathering for accruals. Affected landlords must structure disposal planning around the post-April 2020 reality.
    I have shared a flat with my lodger for 5 years, does Letting Relief apply?+
    Possibly, this is the surviving Letting Relief scenario post-April 2020. Where YOU (the owner) + your TENANT (lodger) both OCCUPY THE DWELLING SIMULTANEOUSLY, Letting Relief at up to £40,000 may still apply. Most common in main-home lodger arrangements where the owner remains in residence + lets one or more rooms. The shared-occupancy requirement is genuine, owner needs to actually live there alongside tenant; not just leave belongings + return occasionally. Rent-a-Room scheme typically applies in parallel for the income side (£7,500 annual threshold). Letting Relief is the CGT-side counterpart for the eventual disposal of the property. Documentation of shared occupancy via electoral roll, council tax, utility bills important.

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