You don't usually have to pay Capital Gains Tax when you sell or dispose of your own home - you get a relief called Private Residence Relief. You may have to pay Capital Gains Tax if you own more than one home or you use your home for business purposes.
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When you sell or dispose of your own home you don't usually have to pay any Capital Gains Tax - as long as for all the time that you've owned it both of the following apply:
You may also qualify for this relief if you sell part of the garden that's attached to your home without selling your home at the same time.
To work out the relief, you need to work out the period that you've owned your home for. This starts on the later of:
It ends on the date that you sell or dispose of it.
The final three years (36 months) always qualify for relief, even if you weren't living there, as long as it's been your only or main home at some point during the time that you've owned it.
You might not get the full amount of relief if:
You don’t have to claim Private Residence Relief - it's given automatically - but you may have to show the amount of relief due on your Self Assessment tax return if you normally complete one.
If the sale or disposal of your home would have qualified for Private Residence Relief if you'd made a gain, but you made a loss instead, you won't be able to set that loss off against other gains - it's not an allowable loss.
If only part of your home qualified for Private Residence Relief then you may be able to claim for any loss on the part that didn't qualify.
What to do if you've made a loss
Even if you didn't live in your home for all of the time that you owned it, you may still be entitled to the full amount of Private Residence Relief.
You may still be able to get the full relief if you can’t move into your home immediately when you first buy it. For example if you can’t sell your old home or you need to refurbish your new home. If you move in within 12 months you'll still get the full relief. This may be extended to two years in exceptional circumstances.
You may still get the full relief even if you didn't live in your home all of the time that you owned it. The final 36 months (three years) that you own it will be treated as if you lived there, even if you didn't, as long as the property has been your only or main home at some time during the time that you owned it.
You'll still get the full relief if you couldn’t live in your home because you were employed and either:
The following must also apply:
If you can't return to live in the house because your existing job still requires you to work away, you'll get the full amount of relief.
See the section 'Living away from home' below if you were absent for other reasons.
You bought a house in 1994 and used it as your main home.
Your employer sent you to work abroad in 1995.
You returned to your main home in 2000 and lived in it until you sold it in 2011.
You're entitled to full Private Residence Relief as your absence was because you had to work abroad.
You'll still get the full amount of relief if you were absent from your home, but not working away, if all of the following apply:
Download the latest helpsheet on Private Residence Relief - Helpsheet 283 (PDF 74K)
You might work at home because you run your business from there. If you do, you can still get the full amount of the relief as long as you keep using all of your house as a home. For example, the room you use as an office may also be used as a guest bedroom.
But if any part of your home is used exclusively for business purposes, for example part of your home is used as a joiner’s workshop, you'll have to work out if there's any Capital Gains Tax to pay.
You use 25 per cent of your home as business premises and 75 per cent as your living area.
You sell your home making a gain of £100,000.
You'd be entitled to Private Residence Relief of £75,000 on the part used as your home (75 per cent of £100,000).
You'd have to work out the Capital Gains Tax due on the remaining gain of £25,000 (£100,000 less £75,000).
If you've let out all or part of your home you may not get full Private Residence Relief when you sell or dispose of it, but you may get another relief known as 'Letting Relief'.
The maximum amount of Letting Relief due is the lower of:
You used 60 per cent of your house as your home and let out the other 40 per cent.
You sell the property, making a gain of £60,000.
You're entitled to Private Residence Relief of £36,000 on the part used as your home (60 per cent of the £60,000 gain).
The remaining gain on the part of your home that's been let is £24,000.
The maximum Letting Relief due is £24,000 as this is the lower of:
There's no Capital Gains Tax to pay - the gain of £60,000 is covered by the £36,000 Private Residence Relief and the £24,000 Letting Relief.
If you live in - not just own - more than one property you can telephone or write to HM Revenue and Customs(HMRC) to tell them which one you want to choose - or 'nominate as' - your main home. See the link below to contact HMRC.
If you wish to make a choice - or 'nomination' - it must be made within two years of changing the number of properties you live in. You should make a new nomination whenever the number of homes you live in changes.
For example, you buy a second home in May 2010, you can nominate either this or your usual home as your main home, but you must do so by May 2012.
If you don't tell HMRC which property you want them to treat as your main home, the one that's treated as your main home will be decided on the facts. This may affect the amount of Capital Gains Tax you have to pay.
If you're married or in a civil partnership and own two or more homes between you, any nomination must be made jointly and be signed by both of you. You're only entitled to Private Residence Relief on one home between you.
If you buy a house for a relative to live in and don't live in it yourself, you won't usually get Private Residence Relief when you come to sell or dispose of the property.
But, if you bought the property before 5 April 1988, you may get Private Residence Relief if it was purchased for:
There are other criteria you need to meet, more information can be found by following the link below.
The relief does not apply for a father or father-in-law and was withdrawn for purchases after 5 April 1988.
Download the latest helpsheet on Private Residence Relief - Helpsheet 283 (PDF 74K)
