Private Residence Relief When You Rent Out Your Home: 2026/27 Guide

Letting Relief is a Capital Gains Tax relief that may reduce the taxable gain when you sell a property that was previously your main home and part of it was let while you continued to live there.

However, the rules changed significantly from April 2020, meaning many landlords who move out and let their entire property no longer qualify for this relief.

Where a property has been your main residence, Private Residence Relief may still cover the period you lived there, along with the final nine months of ownership. If part of the gain remains taxable after applying available reliefs, Capital Gains Tax may become payable. Any taxable gain is charged under the wider CGT and Income Tax rules explained in our ultimate guide to personal tax in the UK.

Understanding how Letting Relief Capital Gains Tax rules work is important because incorrect assumptions can result in unexpected liabilities when selling a former home that has been rented out.

This guide explains how Letting Relief works alongside Private Residence Relief, when it can still be claimed, how the calculation works and how the rules apply to Capital Gains Tax on rented property.

Letting Relief: Who Can Still Claim It?

Letting Relief is still available, but the rules are much narrower than they were before 6 April 2020. For disposals from that date, the relief generally applies where you let part of your main home while you continue to occupy the property and share it with your tenant.

If you moved out of your former home and then rented the entire property to tenants, you will generally not qualify for Letting Relief for that later rental period under the current rules. Private Residence Relief may still cover the period when the property was genuinely your only or main residence, together with the final qualifying period of ownership.

When Does Letting Relief Apply?

What is Letting Relief?

Letting Relief is a Capital Gains Tax relief that can reduce the taxable gain when you sell a property that was previously your main residence and has also been let out.

Historically, Letting Relief was widely available to homeowners who moved out of their property and later rented it to tenants. However, from April 2020, the rules became much more restricted.

Under the current rules, Letting Relief is generally only available where:

• The property was your main residence at some point.
• You continued living in the property while letting part of it to another person.
• The letting involved shared occupation of the home.

This means many former homeowners who moved out completely and rented the entire property will no longer qualify.

How Private Residence Relief applies when you let your home

Private Residence Relief remains available for the period when the property was your only or main residence.

If you lived in your home for part of the ownership period and later rented it out, the gain is usually divided between:

• The period that qualifies for Private Residence Relief.
• The period where the property was rented and may create a taxable gain.

The final nine months of ownership are also generally treated as qualifying occupation, provided the property was your main residence at some point during ownership. The full set of Private Residence Relief conditions covers exactly what counts as qualifying occupation in more detail.

This final exemption applies even if you are no longer living in the property when it is sold.

Does the Final 9 Months Always Qualify for Private Residence Relief?

If the property has been your only or main residence at some point during ownership, the final 9 months of ownership normally qualify for Private Residence Relief regardless of how the property is used during that period.

A longer final qualifying period can apply in certain circumstances, including for some disabled people and people in long-term residential care.

Calculating Private Residence Relief on a rented property

When calculating Private Residence Relief, start by identifying the total gain and the proportion of the ownership period that qualifies as residence. Broadly, the qualifying period includes the time the property was genuinely your only or main residence plus qualifying deemed-occupation periods and the final qualifying period of ownership.

A simplified starting formula is:

Private Residence Relief = Total gain × Qualifying residence period ÷ Total ownership period

The result should then be considered alongside any available Letting Relief and the normal Capital Gains Tax rules.

The calculation for a property that has been both occupied and rented is based on the proportion of ownership that qualifies for relief.

The basic calculation is:

Private Residence Relief = Total gain × (qualifying occupation period ÷ total ownership period)

After calculating the relief, any remaining taxable gain may be reduced by:

• Available capital losses.
• The £3,000 Annual Exempt Amount for 2026/27.
• Any other available CGT reliefs.

A fuller walkthrough of how selling your home can avoid Capital Gains Tax using PRR sets out this same apportionment method with additional worked examples.

The remaining gain is then subject to the applicable residential property Capital Gains Tax rates.

Letting Relief Calculator Example: PRR and CGT

A Letting Relief calculator needs to consider more than the property’s purchase and sale price. You first calculate the gain, determine the proportion covered by Private Residence Relief, establish whether the post-April-2020 shared-occupation conditions for Letting Relief are satisfied, and then calculate any remaining chargeable gain.

James bought a property in January 2014 for £220,000 and lived there as his main home until January 2020.

He then moved out and rented the property until January 2026.

Total ownership period:

• January 2014 to January 2026 = 144 months.

Qualifying occupation:

• Actual residence: 72 months.
• Final nine-month exemption: 9 months.
• Total qualifying period: 81 months.

The property is sold for £450,000 with allowable costs of £12,000.

Total gain:

£450,000 – £220,000 – £12,000 = £218,000

Private Residence Relief:

£218,000 × (81 ÷ 144) = £122,625

Remaining gain:

£218,000 – £122,625 = £95,375

After deducting the £3,000 Annual Exempt Amount, the taxable gain would be £92,375.

Letting Relief would not apply because James moved out before renting the property and did not share occupation with tenants.

Capital Gains Tax Rules After April 2020

The restriction introduced from April 2020 significantly changed Letting Relief Capital Gains Tax treatment.

Before the change, homeowners could potentially claim up to £40,000 of Letting Relief per owner where they had previously lived in the property before letting it out.

Under the current rules, this is no longer available in most cases.

Letting Relief now generally applies only where the owner and tenant occupy the property together, such as:

• Renting out a spare bedroom while continuing to live in the home.
• Taking in a lodger under a shared occupation arrangement.

If you move out completely and rent the whole property, Letting Relief will normally not be available.

When Can the Relief Still Apply?

Letting Relief may still reduce CGT where the homeowner has shared occupation with tenants.

The maximum relief available is the lowest of:

• £40,000 per owner.
• The amount of Private Residence Relief already available.
• The amount of gain attributable to the letting period.

For jointly owned property, each owner may potentially qualify separately if the conditions are met.

Letting Relief cannot be claimed on a property that was never your main residence. A property in that position is instead assessed entirely under the rules covering tax if selling a second property, since no period of the ownership ever qualified as a main home.

Renting Out Part of Your Home: Shared Occupation Rules

Home Letting Relief is often misunderstood because many people assume it applies whenever a former home is rented out.

In reality, the current rules focus on shared occupation.

A homeowner who rents out a room while continuing to live in the property may still benefit from Letting Relief, provided the other conditions are satisfied.

However, a landlord who moves out and rents the entire property to tenants will generally only receive Private Residence Relief for the period they lived there and the final qualifying period.

Qualifying absences and Private Residence Relief

Certain periods where you were not physically living in the property may still qualify for Private Residence Relief if specific conditions are met.

Examples include:

• Up to three years of absence for any reason.
• Absence while working elsewhere in the UK for up to four years.
• Periods working abroad for an employer.

These rules normally require the property to have been your main residence before the absence and that you return to occupy it afterwards.

The conditions can be complex, so each period of absence should be reviewed individually.

How Long Do You Have to Live in a Property to Avoid Capital Gains Tax?

There is no single minimum period of occupation that automatically makes a property exempt from Capital Gains Tax. Private Residence Relief depends on whether the property was genuinely your only or main residence and on the periods of ownership and qualifying occupation.

If the property was your main residence for only part of the ownership period, PRR may cover the corresponding proportion of the gain together with qualifying periods such as the final 9 months. Any remaining gain may still be taxable.

Capital Gains Tax on rented property

Capital gains tax letting relief becomes relevant when part of a gain on a former or current main residence would otherwise remain chargeable after Private Residence Relief has been calculated. Letting Relief does not remove CGT from every property that has been rented out; eligibility depends particularly on how the property was occupied while it was let.

Capital Gains Tax on rented property is calculated by comparing the sale value with the property’s original cost and allowable expenses.

Allowable deductions may include:

• Purchase costs.
• Stamp Duty Land Tax.
• Legal fees.
• Estate agent fees.
• Qualifying capital improvements.

These are the same broad principles that apply whenever you sell property, whether or not any part of the ownership period qualifies for PRR.

Routine repairs and maintenance costs normally cannot be deducted when calculating the capital gain.

Keeping invoices, completion statements and improvement records is essential to support the calculation.

How Letting Relief Reduces a Capital Gain

Where you qualify, the amount of Letting Relief is generally the lowest of:

• £40,000;
• the amount of Private Residence Relief already due; or
• the amount of the gain attributable to the part of the property let while you were in shared occupation with the tenant.

The remaining chargeable gain is then considered alongside allowable losses and any available Capital Gains Tax Annual Exempt Amount before the final CGT liability is calculated.

The 60-day reporting requirement

If Capital Gains Tax is due on the disposal of UK residential property, the disposal may need to be reported and the CGT paid within 60 days of completion. Private Residence Relief and any available Letting Relief should therefore be calculated promptly rather than waiting until the next Self Assessment deadline.

If Capital Gains Tax is due after applying Private Residence Relief and any available Letting Relief, you must normally report and pay the tax within 60 days of completion of a UK residential property sale.

The reporting requirement is separate from your Self Assessment tax return.

You should keep records showing:

• When you lived in the property.
• When it was rented out.
• Details of improvements and costs.
• Reliefs claimed.

It’s easy to overlook this obligation in the rush of completing a sale, so it’s worth building in a reminder not to forget to report property gains within the 60-day window. If Private Residence Relief removes the entire gain and no CGT is payable, the 60-day reporting requirement normally does not apply.

Common PRR and Property CGT Mistakes

• Assuming Letting Relief applies to all former homes that are rented out.
• Ignoring the April 2020 Letting Relief changes.
• Failing to calculate Private Residence Relief correctly.
• Not keeping evidence of occupation periods.
• Claiming repairs as capital improvements.
• Missing the 60-day reporting deadline where CGT is due.

Key takeaways

Letting Relief can reduce Capital Gains Tax in limited circumstances, but it is no longer widely available to landlords who move out and rent their entire property.

Private Residence Relief remains the main relief for homeowners, covering the period when a property was genuinely used as a main residence and the final nine months of ownership.

Understanding the interaction between PRR, Letting Relief and Capital Gains Tax on rented property helps property owners calculate their liability correctly and avoid unexpected tax charges when selling.

Case Study: Reviewing CGT Relief Before Selling a Former Home

A homeowner visited our Fulham Broadway office before selling a property that had previously been their main residence and was later rented out to tenants. They wanted to understand whether they could claim Letting Relief Capital Gains Tax relief and how the rental period would affect their overall CGT liability.

During the consultation, we reviewed the property’s ownership history, periods of occupation, letting arrangements and supporting records to establish how Private Residence Relief applied. We explained that while PRR could cover the period when the property was used as the homeowner’s main residence, Letting Relief is now restricted and generally only available where the owner continued living in the property while letting part of it. We also reviewed the impact of the final nine months exemption, available allowances and the 60-day reporting requirement where CGT becomes payable.

Following the review, the homeowner understood how PRR and Letting Relief interact, identified the reliefs available in their circumstances and gained clarity on their potential Capital Gains Tax on rented property liability before completing the sale. This helped them prepare the correct records and avoid relying on outdated Letting Relief rules that no longer apply in most situations.