This Content Was Last Updated on February 9, 2017 by Jessica Garbett


With the self assessment deadline approaching and with multiple property ownership at a high level, let’s look at the private residence exemption for capital gains tax purposes.

Private residence relief applies for capital gains tax purposes if the dwelling house or part of the dwelling house has been the individual’s only or main residence during some period of ownership. If an individual owns more than one property, they may make an election. It is essential that the individual has actually lived in the property at some point and HMRC will often ask for proof of this in the event of an inquiry.

If during the period of ownership the dwelling house or part of the dwelling house has been used exclusively for some other purpose then the relief is reduced. If the property has been the individual’s principal private residence at some point, the last 36 months of ownership will be treated as if it was the individual’s only or main residence even if in fact it was not so used, for tax years up to and including 2013/14.

However, this final period exemption will be reduced from 36 months to 18 months from 6 April 2014.

Let property relief

A further relief may be available where private residence relief is restricted because some or all of the dwelling has been let as residential accommodation (TCGA 1992 s223(4)). It must be noted, however, that let property relief only applies if the property has been the principal private residence of the individual at some point..


A dwelling house which is owned by husband and wife Mr & Mrs Green in the proportion 40% by husband and 60% by wife is sold in March 2014 (contracts exchanged on 14 March and completion on 1 April) for £600,000 net of allowable expenses. The house cost £400,000 including the allowable expenses. The house was purchased in 2004 contracts exchanged on 15 March 2004 and completed on 3 May 2004.

Mr & Mrs Green lived in the house as their principal private residence from 3 May 2004 until 15 March 2007, then let the property to tenants until 31 December 2012; then the property was empty until it was sold.

The capital gains tax position is as follows:

Total (£)

Mr. Green (£)

Mrs. Green (£)

Sale proceeds








Net gain




Less: Private Residence Relief (3+3/10)




Gain arising by reason of letting




Letting relief, lower of:

1. Private residence relief



2. Gain by reason of letting



3. Statutory amount



Lower of above three is



Chargeable gain



In the above calculations the period qualifying for private residence relief is the period when the house was occupied as a principal private residence plus the last 36 months. The period of ownership is from date of exchange on purchase to date of exchange on sale.

If either Mr or Mrs Green were in business while they were living in the house they may have used part of the house for business purposes such as one room being used as an office. If that room was used exclusively for business purposes then the private residence relief would be restricted, based on period used exclusively for business purpose and say on the size of that room compared to the size of the house. However, if the room was used for business purposes but not exclusively (ie some non-business use and some business use) then there will be no restriction of the private residence relief for this business use.

Husbands and wives or civil partners can elect for property held in their joint names to be held in any proportion if that couple live together. This can be done using HMRC form 17.

Visit the tax section of ACCA’s Technical Advisory Website for further self assessment tips.

Article shared from ACCA In Practice