Principal Private Residence Relief (PPR)

Full Relief on Your Main Home

If you have lived in a property as your only or main residence for the entire period of ownership, the entire gain is exempt from CGT under PPR. This is the simplest and most common scenario: you buy a house, live in it, sell it, and pay no CGT on any increase in value. There is no limit on the amount of gain that can be exempted, making this a very valuable relief for homeowners in areas where property prices have risen significantly. For example, if you bought a house for £300,000 and sold it 20 years later for £800,000, the entire £500,000 gain is tax-free provided the property was your main home throughout the ownership period. PPR also applies when the property has been used as your main residence for only part of the ownership period, in which case the gain is apportioned on a time basis. The relief also extends to the garden and grounds up to 0.5 hectares (or larger if HMRC accepts that the larger grounds are required for the reasonable enjoyment of the property). If you sell part of your garden separately (e.g., a building plot), PPR may apply to that gain if you meet certain conditions, including that the land is part of the grounds of your main residence and you have not yet sold the main house.

Final 9 Months Exemption

If you move out of your main home before selling it, the final 9 months of ownership are always treated as deemed occupation for PPR purposes, regardless of why you moved out. This means that if you sell your property within 9 months of moving out, the entire gain is still exempt (assuming you lived there for the rest of the ownership period). The final 9 months exemption is valuable for people who move to a new home before selling their old one, allowing time to market and complete the sale without triggering a CGT charge. There is no requirement for the property to be occupied during the final 9 months, and there is no limit on how many times you can use this relief — it applies to every property you ever own as your main home. The final 9 months exemption applies automatically and does not need to be claimed. Previously, the final exemption period was 36 months, but this was reduced to 18 months in 2014 and then to 9 months from April 2020. For disabled persons or residents in a care home, the final exemption period is extended to 36 months, provided the property was their main home before moving out. This extension recognises the particular circumstances of those who need to move into care and may take longer to sell their former home.

Deemed Occupation and Periods of Absence

Certain periods of absence from your main home are treated as deemed occupation for PPR purposes, meaning the gain during those periods is still exempt. These include: any period of absence of up to 3 years for any reason (this is a general catch-all provision); employment-related absence — where your employment requires you to work elsewhere, up to 4 years (with a maximum total of 4 years for all such absences); overseas employment — where your employment requires you to work outside the UK, there is no time limit on the absence provided you lived in the property before and after the absence; any period of absence of up to 3 years for any reason (including travelling, caring for relatives, or simply living elsewhere). To benefit from deemed occupation treatment, the property must have been your main residence at some point before the absence, and you must have no other main residence during the absence (or if you do, you must elect which is your main residence). If you have multiple homes, you can make a PPR election to nominate which one is treated as your main residence for tax purposes. This election must be made within 2 years of the change in use and can be backdated. A PPR election can significantly reduce your CGT liability when selling a former main home that you have let out or used periodically.

Garden and Grounds

PPR extends to the garden and grounds of your main home, up to a maximum of 0.5 hectares (approximately 1.24 acres). The relief covers the land that is occupied with and used as the garden or grounds of the residence, including land that is used for recreational purposes, as a vegetable patch, or as a paddock, provided it is incidental to the enjoyment of the house. If the garden exceeds 0.5 hectares, only the part of the gain attributable to the first 0.5 hectares is exempt, unless HMRC accepts that a larger area is required for the reasonable enjoyment of the property (taking into account the size and character of the dwelling). When you sell part of your garden separately (e.g., as a building plot), PPR may still apply if the land is part of the grounds of your main residence and you have not yet sold the main house. If you sell the garden after selling the main house, PPR does not apply to the garden sale. The sale of land with development potential can be particularly complex, as HMRC may argue that the land is not being used as garden or grounds. Professional advice is recommended if you are selling part of your garden with development potential.

Letting Relief

Letting Relief provides additional exemption where you let out your former main home. The relief applies when the property was your main residence at some point and you let all or part of it while you were not living there. Letting Relief exempts the lower of: £40,000 (per owner), the amount of PPR already due (based on the period of occupation), or the gain attributable to the letting period. For example, if you owned a property for 10 years, lived there for 5 years, and let it for 5 years, with a total gain of £100,000, the gain is split equally: £50,000 exempt under PPR (the period of occupation), and £50,000 attributable to the letting period. Letting Relief then exempts the lower of £40,000 (£20,000 per owner if jointly owned), £50,000 (the PPR exemption), or £50,000 (the letting gain). So an additional £40,000 would be exempt, leaving only £10,000 of the gain chargeable. Letting Relief was significantly restricted from April 2020: it now only applies where the owner was in shared occupancy with the tenant (i.e., the landlord lived in the same property as the tenant, such as a lodger). It no longer applies where the owner moved out completely before letting the property. This restriction removed the relief for many buy-to-let landlords who had previously lived in their rental property. The relief is per owner, so for a jointly owned property, each owner gets up to £40,000 of Letting Relief.

FAQs

Can I claim PPR on two properties at the same time?

No. You can only have one main residence for PPR purposes at any given time. If you own two homes, you can make a PPR election within 2 years to nominate which is your main residence. Without an election, HMRC will decide based on the facts.

What happens if I rent out my former main home?

The gain during the letting period is not covered by PPR. However, the final 9 months of ownership are always exempt, and Letting Relief may apply if you shared occupancy with the tenant. You may also have a CGT liability on the letting period.

Does PPR apply if I live abroad and return to my UK home?

If you are non-UK resident and sell a UK property that was once your main home, PPR may apply for the period you lived there, plus the final 9 months. You should seek professional advice on the interaction of UK CGT and double taxation treaties.

How do I elect which property is my main residence?

You make a PPR election by writing to HMRC within 2 years of acquiring a second home. The election specifies which property you wish to be treated as your main residence. You can change the election at any time by notifying HMRC.