Lettings Relief

Lettings relief can help diminish the Capital Gains Tax (CGT) due when selling a property that once served as your primary residence and was partially rented out while you lived there. Typically, selling your main home doesn't attract CGT due to Private Residence Relief (PRR). However, if the property was partly rented or you didn't reside there throughout, CGT may apply to profits from the sale, with full PRR potentially not applicable.

For the 2024/25 tax period, the CGT allowance is £3,000. Profits under this threshold need not be reported to HMRC.

If you concurrently occupied your home with tenants, you might be entitled to relief on taxable gains from the sale. The relief amount is the least of the following:

• The amount of PRR received
• £40,000
• Profit gained during the rental period of part of your home

This relief does not apply to periods when the property was unoccupied or wholly rented out.

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Calculating Your Relief

To determine your eligibility for lettings relief, follow these steps:

1. Compute the total profit from the property sale.
2. Calculate the duration the property was your primary residence versus the rental period.
3. Determine the percentage of time the property served as your main home versus the rental period.
4. Ascertain the profit eligible for PRR based on the tenure as your main residence.
5. Calculate the remaining profit from renting out the property.
6. Choose the lowest of the three options for lettings relief.

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Example Scenario

Imagine you profit £80,000 from selling your property, owned for 15 years—10 as your main home and 5 with part of it rented:

• The property was your primary residence for 30% of the ownership period and rented for the remaining 70%.
• You qualify for £24,000 in PRR (30% of the total profit).
• The profit from the rental period is £56,000.
• Your lettings relief amounts to £24,000, the lowest of:
  • £24,000 (the PRR amount)
  • £40,000
  • £56,000 (profit from renting out the property)

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Need Further Assistance?

Remember, lettings relief is applicable only for periods when the property was shared between the homeowner and tenant. Entirely rented properties do not qualify for CGT relief.

For detailed insights, refer to our guide, "When do I owe CGT if I sell my house?" Additionally, our team of accredited accountants is ready to provide one-off tax advice and various services to support your financial well-being.