Private Residence Relief for Landlords and Second Homes

Private residence relief for landlords can reduce Capital Gains Tax where a rental or second property was genuinely occupied as the owner’s only or main residence during part of the ownership period. Relief does not arise simply because a property was owned, occasionally used or later rented out.

The amount of relief depends on the property’s actual occupation history, qualifying periods of absence, the final 9 months of ownership and, where relevant, whether the property qualifies under the current Lettings Relief rules.

Private Residence Relief (PRR) can exempt part of the gain attributable to periods when a property was your main home. Certain qualifying periods of absence and the final nine months of ownership may also qualify, subject to the relevant conditions. However, a property that has always been a buy-to-let or second home and has never been your main residence will generally not qualify for PRR.

For landlords, the calculation can become more complicated when a property has changed between being a home and a rental, when you own multiple properties, when you move abroad, or when part of the property is used for business.

This guide explains Private Residence Relief for Landlords in practical terms, including how PRR applies to a second home, how to calculate the relief, main residence nominations, qualifying absences, Lettings Relief, business use, non-UK residents, reporting deadlines and the records you should keep.

When Can a Landlord Claim Private Residence Relief?

Can a Landlord Claim Private Residence Relief?

Yes, a landlord may be able to claim Private Residence Relief if the property was genuinely their only or main residence for some or all of the period of ownership.

However, PRR is generally based on the period for which the property qualifies as your main residence rather than simply the fact that you own it or previously rented it out.

• A property that was always a buy-to-let and never your main home will normally not qualify for PRR.
• A former main residence that was later rented out may qualify for PRR for its qualifying residence period and certain additional periods.
• The final nine months of ownership can qualify even if you are no longer living in the property, provided the property has been your only or main residence at some point.
• Certain periods of absence may also qualify if the statutory conditions are met.
• Lettings Relief is now restricted and generally requires you to have lived in the property while it was being let.

The amount of relief therefore depends heavily on the property’s history, your occupation and the dates on which its use changed.

What Is Private Residence Relief?

Private Residence Relief, commonly abbreviated to PRR, is a Capital Gains Tax relief available when you dispose of a property that has been your only or main residence.

Where a property qualifies for PRR for part of the ownership period, the gain is normally apportioned between qualifying and non-qualifying periods. The qualifying portion can then be relieved from CGT.

GOV.UK confirms that you must have lived in the property as your only or main residence at some point while you owned it. If the property was your main home throughout ownership and the other conditions are satisfied, the gain may qualify for full relief.

What Does PRR Actually Cover?

Depending on your circumstances, PRR can cover:

• Periods when the property was your only or main residence.
• The final nine months of ownership, subject to the qualifying conditions.
• Certain statutory periods of absence.
• In some circumstances, periods connected with employment-related absence.

It is important not to assume that every period during which you owned a property automatically qualifies. The dates and circumstances of your occupation matter.

Private Residence Relief for Landlords: When Does It Apply?

The most important distinction for landlords is between a property that has always been an investment property and a property that was previously your main home and was later rented out.

How Does Private Residence Relief Work for a Second Home?

If you genuinely use two or more properties as residences, you may be able to nominate which one is treated as your main residence for Private Residence Relief purposes. The nomination normally has to be made within 2 years of the date on which you first have that particular combination of residences.

A property must actually be used as a residence before it can be nominated. Simply owning a second property does not make it eligible for a main-residence nomination.

Owning two homes does not automatically prevent you from claiming PRR. However, the rules become more important because you generally cannot treat two properties as your main residence for the same period.

If you own more than one property, you may be able to nominate one property as your main residence for PRR purposes. The nomination must generally be made within two years whenever the combination of homes changes.

Example: Owning a Main Home and a Second Home

Suppose you own:

• Your usual family home in London.
• A second property that you use at weekends and during holidays.

If the second property has never genuinely been your main residence, simply calling it your main home does not automatically create PRR entitlement. The facts and circumstances of your occupation matter.

If you genuinely move into the second property and it becomes your main residence, the period for which it qualifies can potentially benefit from PRR. Your nomination and the actual pattern of occupation should therefore be considered together.

How to Calculate Private Residence Relief for Landlords

The basic approach to a private residence relief calculation is to determine the overall gain first and then identify the proportion of the ownership period that qualifies for PRR.

Basic PRR calculation:

PRR = Total gain × (qualifying period ÷ total period of ownership)

The calculation becomes more useful when expressed as a series of steps.

Step 1: Calculate the Overall Property Gain

Start by working out the gain on disposal.

In broad terms:

Sale proceeds − allowable acquisition and disposal costs = gain

Depending on the circumstances, allowable costs can include certain acquisition costs, disposal costs and qualifying capital expenditure that enhances the property.

You should keep invoices and other evidence supporting any costs included in the calculation.

Step 2: Establish the Total Ownership Period

Identify the date you acquired the property and the date you disposed of it.

For PRR purposes, HMRC’s calculation uses the period of ownership and the qualifying periods within that ownership period. The final nine months can qualify even if you were not living in the property during those months, provided the property has been your only or main residence at some point.

Step 3: Identify the Periods You Actually Lived There

Record the dates when the property was genuinely your only or main residence.

This is particularly important for landlords who:

• Moved into a rental property before letting it.
• Moved out of their former home and subsequently rented it.
• Moved between two homes.
• Returned to a property after a period of absence.

Do not rely solely on the address recorded on one document. The overall facts of occupation are relevant.

Step 4: Add Any Qualifying Periods of Absence

Certain periods when you were not physically living in the property may still count as periods of residence if the statutory conditions are satisfied.

Step 5: Add the Final Nine Months

The final nine months of ownership generally qualify for PRR where the property has been your only or main residence at some point.

This rule is particularly relevant where you move out of a former home and then sell it later. It does not mean that every second home automatically receives nine months of PRR: the property must first have qualified as your only or main residence at some point.

Step 6: Apportion the Gain

Once you know the qualifying period, apply it to the overall gain.

Example: If a property was owned for 120 months and 72 months qualify for PRR, the starting proportion of the gain qualifying for relief would be 72/120, subject to any additional qualifying periods and the detailed rules applying to the property.

Worked Example: Private Residence Relief for a Former Rental Property

Consider a landlord who purchased a property for £250,000 and later sold it for £520,000.

Assume allowable purchase and sale costs total £15,000.

The initial gain would therefore be:

£520,000 − £250,000 − £15,000 = £255,000

The owner lived in the property as their main residence for six years and then moved out. The property was subsequently rented for six years before being sold.

Total ownership:

12 years = 144 months

Actual qualifying residence:

6 years = 72 months

Final qualifying period:

9 months

Assuming there are no other qualifying periods of absence:

Qualifying period = 81 months

The illustrative PRR calculation is therefore:

£255,000 × (81 ÷ 144) = £143,437.50

Rounded to the nearest pound, the illustrative relief would be approximately £143,438.

The remaining gain before applying the annual exempt amount and the individual’s applicable CGT rate would therefore be approximately:

£255,000 − £143,438 = £111,562

This example demonstrates why the private residence relief calculation depends so heavily on accurate occupation dates.

Important: The final CGT liability cannot be determined from the PRR calculation alone. The annual exempt amount, the individual’s taxable income, applicable CGT rates, ownership structure and other relevant circumstances must also be considered.

What If You Move Out of Your Main Home and Rent It Out?

This is one of the most common situations for landlords.

You may move to a new home and decide to keep your former residence as a rental property. When you eventually sell the former home, PRR may still cover:

• The period when it was your main residence.
• Qualifying periods of absence where the statutory conditions are satisfied.
• The final nine months of ownership.

The period in which the property was simply an investment or rental property will not normally receive PRR merely because it was once your home.

This is why landlords should record the exact date on which they moved in, moved out, began letting the property and eventually sold it.

For more information about how letting can interact with PRR, see this guide to second homes.

Does the Final 9 Months Still Qualify for PRR?

Yes. If the property was your only or main residence at some point during ownership, the final 9 months normally qualify for Private Residence Relief even if you had moved out or rented the property during that final period.

The final-period exemption does not make the whole rental period exempt. Earlier non-qualifying periods still need to be considered separately.

Qualifying Absences: Can Time Away From Your Home Still Count?

Yes, certain periods of absence can count as qualifying residence for PRR, but specific conditions must be met.

HMRC recognises several categories of qualifying absence. These are not simply general allowances that can be claimed whenever you decide to leave a property.

Up to Three Years of Absence

Periods of absence for any reason can potentially qualify where the total period does not exceed three years and the relevant statutory conditions are satisfied. HMRC guidance requires the property to have been your only or main residence before the absence and generally afterwards as well.

Employment-Related Absence of Up to Four Years

Certain periods when you are required to live elsewhere because of your place of work or an employment condition can qualify for up to four years, provided the relevant conditions are satisfied.

Working Outside the UK

Certain periods of employment outside the UK can qualify for relief for the period of absence, subject to the statutory requirements. HMRC specifically distinguishes employment where all duties are performed outside the UK from other types of absence.

Why the Before-and-After Rule Matters

Qualifying absence rules are conditional. In many cases, the property must have been occupied as the individual’s only or main residence before and after the absence, although employment-related exceptions can apply where returning to the property was prevented by work circumstances.

One of the most important points is that qualifying absence rules are conditional. In many cases, the property must have been your only or main residence before the absence and must become your only or main residence again afterwards, unless a specific employment-related exception applies.

Therefore, landlords should not automatically add every period away from the property to their PRR calculation.

Does Letting a Property Remove Private Residence Relief?

No. Letting a former main residence does not automatically erase the PRR attributable to the period when it was your main home.

However, the rental period may not itself qualify for PRR unless another specific rule applies.

This distinction is important:

• Former main residence: PRR may apply to the qualifying residence period.
• Later rental period: generally taxable unless another relief or qualifying rule applies.
• Final nine months: potentially qualifying subject to the PRR conditions.

GOV.UK confirms that where you let out a former home, the chargeable gain is generally the gain remaining after the Private Residence Relief available to you has been deducted.

Lettings Relief for Landlords

Lettings Relief is now much more restricted than under the historic rules. For current disposals, it generally applies only where the owner shares occupation of the home with a tenant.

If you moved out and then rented the whole property to tenants, the ordinary rental period will not normally qualify for Lettings Relief simply because the property was once your main residence.

Today, Lettings Relief is generally available only where you let part of your home while continuing to live in another part as your main residence.

If you moved out completely and then let the whole property to tenants, you will generally not qualify for Lettings Relief simply because the property was previously your home.

Where the relief applies, the maximum is generally £40,000 per owner, subject to the applicable limits and the amount of qualifying PRR and gain attributable to the letting.

This means a landlord should not automatically deduct £40,000 from a property gain. Eligibility and the relevant calculation must be established first.

How Does Owning Multiple Homes Affect PRR?

If you own two or more homes, deciding which property is your main residence can have a significant effect on your eventual CGT liability.

You can generally nominate one property as your main residence where you have more than one residence that qualifies. HMRC states that the nomination should generally be made within two years whenever the combination of homes changes.

What If You Do Not Make a Nomination?

If you do not make a valid nomination, the question of which property is your main residence can depend on the facts and circumstances of your occupation.

Relevant evidence can include:

• Where you actually live.
• Where your family lives.
• The pattern and quality of your occupation.
• Where your personal belongings are kept.
• Where you receive correspondence.
• Other evidence demonstrating how the property was used as a home.

For landlords with valuable properties, the decision should be considered as part of wider tax planning rather than left until a sale is approaching.

Can You Change Your Main Residence Nomination?

Yes. A main residence nomination can change when your circumstances change, but the relevant time limits and ownership circumstances matter.

If the combination of your homes changes, HMRC generally gives you two years to make a nomination.

The important point for landlords is that a nomination is not a substitute for genuinely living in a property. You should consider the nomination alongside the actual use and occupation of the homes. For more details, see guidance on nominating a home for CGT relief.

Does a Second Home Automatically Pay Capital Gains Tax?

A second home does not automatically qualify for Private Residence Relief, but it is also not automatically fully taxable. The key question is whether the property was genuinely used as a residence and, where more than one residence existed, which property was treated as the main residence for the relevant period.

If you sell a property that is not your home, CGT may arise on the gain. GOV.UK specifically includes buy-to-let properties among properties that can be subject to CGT when disposed of.

For a second home that was previously your main residence, the position is different because some of the gain may qualify for PRR.

This is why the phrase capital gains tax on second home does not have a single answer. The tax position depends on:

• Whether you lived in the property.
• Whether it was your only or main residence.
• How long you lived there.
• How long it was rented out.
• Whether qualifying absences occurred.
• Whether the final nine-month rule applies.
• Whether any Lettings Relief is available.
• Your ownership structure and personal tax position.

Capital Gains Tax for Landlords: What Costs Can Reduce the Gain?

When calculating Capital Gains Tax for Landlords, it is important to calculate the underlying gain correctly before applying PRR.

Depending on the circumstances, allowable costs can include certain:

• Purchase costs.
• Legal and professional costs connected with acquisition or disposal.
• Estate agent and selling costs.
• Stamp Duty Land Tax and similar acquisition taxes where allowable.
• Qualifying capital improvement expenditure.

Routine repairs and ordinary maintenance are not automatically treated in the same way as capital improvements for CGT purposes. Keep invoices and supporting documentation so the treatment of each cost can be established.

What Happens If Part of the Property Is Used for Business?

Business use can affect PRR where part of a property is used exclusively for business purposes.

HMRC’s current guidance states that exclusive business use can prevent that part of the property from receiving the same PRR treatment. However, simply working occasionally from a room at home does not necessarily create exclusive business use.

For example, if you use a bedroom as an occasional home office but it remains available for normal private use, the analysis can be different from a room that is permanently and exclusively used for business.

Landlords and self-employed individuals should therefore review the actual use of each part of the property rather than applying a blanket percentage.

What If You Are Married or in a Civil Partnership?

Married couples and civil partners need to consider the PRR rules jointly when they own or occupy multiple properties.

For PRR purposes, only one property can generally count as the couple’s main residence at any one time.

Transfers between spouses or civil partners can also have separate CGT consequences and should be considered before changing ownership or selling a property.

If a couple owns several properties, professional advice can be particularly valuable because the timing of moves, nominations and disposals can affect the overall tax position.

Spouses or civil partners who are living together can normally have only one main residence between them for Private Residence Relief purposes. Where both have qualifying residences, any nomination generally needs to be made jointly.

Private Residence Relief for Non-UK Resident Landlords

If you live outside the UK but own UK residential property, you may still have UK CGT obligations when you sell the property.

Non-UK residence does not automatically prevent PRR, but the rules for overseas properties and residence can be more complicated. GOV.UK notes specific conditions for claiming relief in relation to overseas property, including a 90-day requirement from 6 April 2015 for relevant tax years.

Capital Gains Tax on UK Property for Overseas Landlords

A non-UK resident landlord selling UK property may need to report the disposal to HMRC and pay any CGT due under the rules applying to UK property disposals.

If the property was also your main residence for part of the ownership period, PRR may reduce the taxable gain, but the detailed residence and property-use history must be considered.

60-Day Capital Gains Tax Reporting for Residential Property

If CGT is due on the disposal of most UK residential property, the disposal generally needs to be reported to HMRC and the CGT paid within 60 days of completion.

This deadline is important for landlords because a PRR calculation may reduce the gain without eliminating it entirely.

Before completion, consider whether you have enough information to establish:

• The acquisition cost.
• Allowable improvement expenditure.
• Professional and selling costs.
• Dates of occupation.
• Dates of letting.
• Qualifying periods of absence.
• Any main residence nomination.
• The ownership shares of each owner.

The 60-day reporting obligation should not be treated as something to address only after the deadline is approaching.

What Records Should Landlords Keep for a PRR Claim?

Good records are essential when calculating PRR, particularly where a property has changed between residential and rental use.

You should consider retaining:

• Purchase and sale documents.
• Completion statements.
• Legal and professional invoices.
• Evidence of qualifying improvement costs.
• Dates you moved into and out of the property.
• Tenancy agreements and letting records.
• Evidence showing how the property was occupied.
• Evidence supporting qualifying employment-related absences.
• Main residence nomination correspondence.
• Records relating to business use of the property.

Useful evidence of residence may include utility records, council tax documents, electoral registration information, bank correspondence and other documents showing that the property was genuinely occupied as your home.

Common Private Residence Relief Mistakes Made by Landlords

Landlords can make costly mistakes when calculating PRR because the rules depend on the property’s complete history.

1. Assuming a Former Main Home Is Fully Exempt

Moving out and renting a former home does not automatically mean the entire gain is covered by PRR. The gain generally needs to be considered by reference to qualifying and non-qualifying periods.

2. Assuming Every Second Home Qualifies

Owning and occasionally using a second home does not automatically make it your main residence. Actual occupation and the relevant nomination rules need to be considered.

3. Claiming the Old Lettings Relief Rules

The rules changed from April 2020. A landlord who moved out completely before letting the entire property should not assume that the historic £40,000 Lettings Relief rules still apply.

4. Ignoring Qualifying Absences

Some employment-related or other qualifying absences may count as periods of residence. Ignoring them can produce an incorrect PRR calculation.

5. Forgetting the Final Nine Months

The final nine months can be an important part of a former main residence calculation. It should be checked whenever the property has previously qualified as your main residence.

6. Using an Incorrect Property Gain

PRR is applied to the gain, so the underlying CGT calculation must be accurate first. Missing allowable acquisition, improvement or disposal costs can increase the taxable gain unnecessarily.

Private Residence Relief vs Capital Gains Tax on a Buy-to-Let Property

How to Reduce Capital Gains Tax on a Second Home

There is no single method that eliminates capital gains tax on second home sales. However, understanding the available reliefs and calculating the gain correctly can reduce the amount of CGT payable.

Depending on your circumstances, you should consider:

• Whether the property has genuinely been your main residence.
• Whether a main residence nomination is appropriate.
• Whether qualifying periods of absence apply.
• Whether the final nine-month period qualifies.
• Whether Lettings Relief is available.
• Whether all allowable costs have been included.
• Whether the timing of the disposal affects the available relief.
• Whether ownership between spouses or civil partners affects the position.

Tax planning should be undertaken before the disposal where possible. Once a sale has completed, some planning opportunities may no longer be available.

Private Residence Relief Calculation Checklist for Landlords

Before finalising your private residence relief calculation, work through this checklist:

1. Confirm the property’s purchase and disposal dates.
2. Calculate the overall capital gain.
3. Identify all allowable acquisition, improvement and disposal costs.
4. Record every period when the property was your only or main residence.
5. Identify periods when the property was rented out.
6. Check whether any periods of absence qualify under the PRR rules.
7. Check whether the final nine months qualify.
8. Review whether Lettings Relief is available.
9. Check whether any part of the property was used exclusively for business.
10. Review any main residence nomination if you owned more than one home.
11. Apply the relevant PRR proportion to the gain.
12. Consider the annual exempt amount and applicable CGT rates.
13. Check whether the 60-day reporting requirement applies.
14. Keep evidence supporting every important part of the calculation.

When Should a Landlord Get Professional Advice?

A straightforward property sale may be relatively easy to calculate, but professional advice can become particularly valuable when:

• You have owned several homes.
• You have moved between properties.
• A former main residence became a rental property.
• You have spent substantial periods working away from home.
• You are a non-UK resident.
• The property is jointly owned.
• Part of the property has been used for business.
• The property has been inherited or transferred.
• You are considering selling more than one property.
• The expected gain is substantial.

The earlier the position is reviewed, the more opportunity there may be to identify potential reliefs, correct records and plan the disposal.

Practical Next Steps Before Selling a Second Home

If you are a landlord planning to sell a second home or former main residence, do not wait until completion to review the PRR position.

1. Build a property timeline: record purchase, occupation, letting and sale dates.
2. Calculate the gain: gather purchase, improvement and disposal costs.
3. Review PRR: identify actual residence periods and qualifying absences.
4. Check the final nine months: confirm whether the property qualifies for this period.
5. Review Lettings Relief: establish whether you continued living in the property while it was let.
6. Check multiple-home rules: review any main residence nomination.
7. Check business use: identify whether any part was used exclusively for business.
8. Prepare for reporting: determine whether a 60-day CGT report will be required.
9. Keep supporting evidence: retain documents that support your calculation and claims.

Taking these steps before selling can make the eventual capital gains tax on property calculation more predictable and reduce the risk of missing an available relief. More details on these rules are available on the government site for tax when you sell your home.

CASE STUDY: Private Residence Relief for a Former Main Home Let Out to Tenants

Michael, a property owner, visited our Farringdon office after deciding to sell a property that he had previously lived in as his main residence before moving to another home. He had subsequently let the property to tenants and was unsure how the rental period would affect his Private Residence Relief and Capital Gains Tax position.

His main concern was whether the entire gain would be taxable because the property had been rented out after he moved away. He also wanted to understand whether the final nine months of ownership and any qualifying periods could be included in his PRR calculation.

During our review, we examined the property’s purchase and sale dates, the period Michael lived there as his main home, the date he moved out, and the subsequent letting period. We also reviewed his purchase, improvement and selling costs to establish the underlying capital gain before applying PRR.

For example, if a property was owned for 144 months, with 72 months spent as the owner’s main residence and a further 9 months qualifying under the final-period rules, the starting PRR calculation would be based on 81 qualifying months out of 144. The remaining gain would then need to be considered for CGT after taking account of the applicable annual exempt amount and other relevant circumstances.

We also explained that moving out and letting the entire property does not automatically remove the PRR available for the period when it was genuinely the owner’s main residence. However, Lettings Relief should not be assumed to apply where the owner moved out completely and subsequently let the whole property.

After reviewing his property history, Michael had a clearer understanding of how the qualifying occupation period, final nine months, letting period and allowable costs affected his potential CGT liability. He was also advised to retain supporting evidence, including occupation records, tenancy agreements, completion statements and property expense documentation.