Main Residence Relief

When selling a home in the UK, Main Residence Relief (also known as Private Residence Relief) is a valuable tax relief that can reduce or eliminate Capital Gains Tax on the profit from selling your only or main home. The rules can be complex, especially with recent tax law updates. Our tax advisors simplify this relief for homeowners, property investors, and accountants, reflecting the latest updates as of 2025, including key clarifications from recent tribunal decisions.

What Is Main Residence Relief?

Main Residence Relief allows homeowners to sell their main home without paying Capital Gains Tax on the profit made. If the property has been your main residence during the time you owned it, all or part of the gain may be exempt.

The key concept is simple: If you live in your property as your only or main home, the period of occupation is sheltered from CGT.

For many homeowners, this means they can sell their property tax-free, but the details of when and how relief applies are crucial — particularly for those with more than one property or who have let out their home.

Key Conditions for Main Residence Relief

To qualify, certain criteria must be met. The following are the main conditions every homeowner and accountant should check carefully:

1. The Property Must Be Your Only or Main Residence

You must have actually lived in the property as your home. Simply owning a property isn’t enough.

• You should have treated it as your main home — for example, by moving in with your family, changing your address for official purposes, or using it for day-to-day living.
• There is no minimum period of occupation required by law. Even a short, genuine period of residence can qualify, provided it reflects a genuine intention to live there.

A landmark tax tribunal confirmed that the quality of occupation matters more than quantity. In other words, what counts is genuine residence — not the number of weeks or months you lived there.

2. Use of the Property

The relief only applies to the part of the property used as your residence.

• If you use part of your home exclusively for business, that part may not qualify.
• If you let out the entire property for a time, only the period of occupation and a limited “final period” will be exempt.
• Gardens and grounds are included, but only up to 0.5 hectares (about 1.25 acres) unless you can show that a larger area is needed for normal residential enjoyment of the property.

3. The Final Period Exemption

Even if you move out before selling, you are still treated as occupying the property for a short final period.

As of 2025, the final period exemption is:

• 9 months for most homeowners.
• 36 months if you are disabled or have moved into long-term care.

This means if you sell your home within 9 months of moving out, you’ll still qualify for relief for that period.

4. Deemed Periods of Occupation

There are also special rules that treat you as living in your home even when you are not physically there. These are called deemed periods of occupation and apply if:

• You were required to live elsewhere for work.
• You were working abroad temporarily.
• You moved out while carrying out renovations or repairs.
• You lived elsewhere but planned to return to the property as your main home.

These deemed periods help prevent the loss of relief due to unavoidable absences.

5. Multiple Properties

If you own more than one home — for example, a city flat and a countryside house — you can only have one main residence at any time for tax purposes.

You can decide which property should be treated as your main residence by making a formal election to HMRC.

• This election must be made within two years of acquiring the second property.
• Once made, you can vary it later to change which home benefits from relief.

For clients with multiple properties, making and reviewing this election is an important part of proactive tax planning.

How Main Residence Relief Is Calculated

If the property has always been your only or main residence, the gain is fully exempt from CGT. If not, the relief is apportioned based on how long it was your main residence compared to the total ownership period.

Example:

• You owned a house for 10 years.
• You lived there for 6 years, then rented it out for 4 years.
• You sell it in 2025, making a gain of £300,000.

You get relief for the 6 years you lived there, plus the final 9 months of ownership.

• 6 years + 0.75 years = 6.75 years.
• 6.75 ÷ 10 = 67.5%.
• £300,000 × 67.5% = £202,500 exempt.
• The remaining £97,500 is chargeable to CGT.

No Minimum Time Requirement — Quality Over Quantity

One of the most significant developments in recent years comes from a key tax tribunal decision, which clarified that there is no minimum period of residence required to qualify for Main Residence Relief.

The case involved a taxpayer who lived in a property for only a few months but did so with the intention of making it his family home. The tribunal held that this short period still counted as genuine occupation, and relief was granted.

This decision reinforces the principle that it’s not about how long you live somewhere — it’s about whether your occupation is real, substantial, and consistent with ordinary domestic living.

As of 2025, there has been no successful HMRC appeal overturning this principle. It remains accepted that a genuine short-term occupation can qualify, provided the taxpayer can show clear evidence of residence and intention.

Changes to the Rules You Need to Know

There have been several updates to Main Residence Relief in recent years that both homeowners and accountants should note:

• Final Period Exemption Reduced: The exemption for the last part of ownership is now 9 months (down from 18 months before 2020).
• Letting relief Restricted: Letting relief is now only available if you lived in the property at the same time as your tenant (for example, renting out a room while still living there). It no longer applies when you let out the whole property after moving out.
• Overseas and Non-Resident Owners: Non-UK residents can only claim PRR if they meet the 90-day occupation test or are UK tax residents during the ownership period.
• Reporting Timeframes: UK residents must report and pay any Capital Gains Tax on residential property within 60 days of completion. Accountants should ensure clients are aware of this strict deadline.

Planning Tips for Maximising Main Residence Relief

For homeowners and accountants advising clients, good planning can significantly increase the amount of gain that is exempt:

1. Establish genuine residence early: Live in the property with real intention — register to vote, move family belongings, and update your correspondence address.
2. Time your move and sale: Try to complete the sale within the 9-month final period after moving out.
3. Keep full records: Maintain documents proving residence: council tax, utility bills, insurance, and correspondence.
4. Review multiple-home elections: Make or vary nominations promptly when clients acquire additional properties.
5. Avoid exclusive business use: Keep at least some private use in any workspace to protect full relief.
6. Plan before letting: Understand that full letting after moving out limits future relief. Seek advice before converting a main home to a rental.
7. Check overseas exposure: For clients with property abroad or non-UK residency, check the 90-night rule and residence status annually.

Common Pitfalls to Avoid

• Assuming relief applies automatically without considering letting or business use.
• Missing the two-year deadline for main residence nominations.
• Selling too long after vacating the property (beyond the 9-month window).
• Believing a short visit counts as residence without clear intention or supporting evidence.
• Using part of the property solely for business (e.g. a dedicated office or studio).
• Ignoring the new 60-day CGT reporting rule.

Why Accountants Should Review This for Clients

For accountants in practice, Main Residence Relief planning presents significant advisory opportunities. Reviewing clients’ property histories, elections, and occupation evidence can prevent future disputes and save substantial tax.

Advisers should:

• Confirm genuine occupation dates.
• Document the client’s intention to reside.
• Model gain calculations under different sale dates.
• Assist with elections and CGT reporting.
• Provide clear advice on letting and business use implications.

Main Residence Relief is one of the most powerful ways to avoid Capital Gains Tax (CGT) in the UK. If used correctly, it can eliminate tax on the sale of your home. However, the rules can be complex, and the benefits have become narrower in recent years. By understanding the requirements, planning, and keeping clear records, homeowners and accountants can make the most of this important relief while following HMRC rules.

TCGA 1992, s. 222; Stephen Bailey v HMRC TC06085.