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Taxes on Property Disposals – Do you Know your reliefs?

Often a person’s home is the most valuable investment he or she will make during their lifetime, and two reliefs exist which may cover, or mitigate, the capital gain made on the property during ownership.

Principle Private Residence Relief

PPR relief is available to individuals on the sale of their own home, referred to in legislation as a ‘dwelling house’, as long as the property has been the individual’s only or main residence, at some time during ownership.

PPR relief will be given in full, provided the following conditions are met;

  • The dwelling house has been the individual’s only or main residence throughout the period of ownership
  • The individual has not been absent from the property during the period of ownership, other than for an allowed period of absence
  • The gardens or grounds, including the dwelling house, are not greater than the permitted area
  • No part of the property has been used exclusively for business purposes during ownership

If all of the above conditions are met, capital gains tax will not be due on the sale of the property. However, it is important to note, even if all of the conditions are met, PPR relief will not be due if the acquisition of the dwelling house was made wholly or partly for the purpose of realising a gain from its disposal. In order for a property to be considered to be a person’s residence, the individual must provide some evidence that their residence in the property showed some degree of permanence or continuity.

If some of the conditions are not met, partial relief may still be due, but the disposal of the property will need to be disclosed on the Capital Gains Tax pages of the individual’s personal tax return.

Lettings Relief

Provided PPR relief applies, the last three years of ownership of the property is treated as if the dwelling was the individual’s only or main residence, regardless of whether it was. Therefore, should the individual move out of the property, PPR relief will still cover any gains made, as long as the property is sold within three years.

In addition to this, if during the period of ownership, the dwelling house has been let as residential accommodation, Lettings Relief will also be due. The amount of relief due is calculated as the lower of 1) the amount of PPR relief already calculated, and 2) £40,000 per individual. Therefore for a couple, this could mean additional relief of up to £80,000 on disposal.

Second Residence

Where an individual owns more than one home, they may, within two years of acquiring a new residence, make an election as to which property is to be their main residence, and hence covered by PPR. Once made, the election may be varied between properties at any time, and this can be a usfeul tax planning tool to establish PPR relief on more than one property. However, both properties must satisfy the conditions for PPR relief, and if no election is made, the main residence will be decided on the facts.


Principle Private Residence relief is a very effective relief to mitigate Capital Gains Tax liabilities on property disposals, particularly combined with Lettings Relief, the 36 month rule and second residence elections. However, it advisable to take proper tax advice on this particular relief, especially where circumstances are not straight forward and full relief may not be due.