Sell the home you actually live in and you usually pay no Capital Gains Tax at all. Here is exactly how Private Residence Relief works in 2025/26, and the situations where it is restricted.
Private Residence Relief, almost always called PRR, is the reason the typical homeowner can sell a house for hundreds of thousands more than they paid and hand none of it to HMRC. It exempts the gain on a property that has been your only or main home, and for most people it works silently and completely: you sell, you owe nothing, and there is nothing to report. But the relief has edges, and those edges matter enormously when a property has been let out, used partly for business, or sat empty after you moved on.
For 2025/26 the stakes are higher than they used to be, because residential property gains that are not relieved are now taxed at 18% and 24%, and the Capital Gains Tax annual exempt amount has been cut to just £3,000. This guide explains how PRR works, the all-important nine-month final period rule, what restricts the relief, and how it interacts with the annual exempt amount and Letting Relief, with worked examples throughout.
When you sell an asset that has risen in value, the gain is potentially subject to Capital Gains Tax. Your home would be caught by this too, were it not for PRR. The relief works by exempting the proportion of the gain that relates to periods when the property was your main residence.
If the property was your only or main home for the entire time you owned it, 100% of the gain is relieved. You pay no CGT, you use none of your annual exempt amount, and there is no requirement to report anything. This is the position for the great majority of homeowners.
Things become more involved only when the property was not your main residence for the whole period: where you let it out, lived elsewhere, or used part of it exclusively for business. Then the gain is split between qualifying and non-qualifying periods, and only the qualifying slice is relieved.
The most important detail in PRR is the final period exemption. The last nine months of your ownership of a property that has been your main home at some point are always treated as qualifying, whether or not you were actually living there during those months.
This rule exists because real life rarely lines up neatly. You might buy your next home and move in before the old one has sold. Without the rule, those overlap months would be non-qualifying and a slice of your gain would become taxable simply because the sale took time. The nine-month exemption removes that unfairness for normal selling delays. (A longer 36-month period applies in limited cases, such as for disabled people or those moving into care.)
Aisha bought a flat in June 2017 for £250,000 and sold it in June 2025 for £370,000, a gain of £120,000. She owned it for 96 months in total. She lived in it as her main home for the first 60 months, then moved in with her partner and let the flat out for the final 36 months.
Her qualifying period for PRR is the 60 months she lived there, plus the final 9 months (which always qualify), giving 69 qualifying months out of 96. So the relieved proportion is 69 divided by 96, which is about 71.9%.
From the £33,750 she deducts her £3,000 annual exempt amount, leaving £30,750. As a higher-rate taxpayer, she pays CGT on residential property at 24%, giving a bill of £7,380. The Capital Gains Tax calculator lets you run the same split for your own dates and figures.
Note how the nine months mattered: without the final period rule, only 60 of 96 months would have qualified, increasing her taxable gain and her bill.
Contrast Aisha with her neighbour Greg, who bought an identical flat at the same time for £250,000 and also sold in June 2025 for £370,000, a gain of £120,000. The difference is that Greg lived in his flat as his only home for the entire 96 months he owned it.
Because the property qualified as his main residence throughout, 100% of his £120,000 gain is covered by Private Residence Relief. Greg pays no Capital Gains Tax, uses none of his £3,000 annual exempt amount, and has nothing to report to HMRC. Two identical flats, identical gains, and yet one owner pays £7,380 and the other pays nothing. The entire difference is the 36 months Aisha let her flat out, which is exactly why the qualifying-period calculation is where the money is won or lost.
Many people still believe that letting a former home out automatically brings a separate, generous Letting Relief. That changed. Letting Relief now only applies where you shared occupation of the dwelling with your tenant, in effect where you took in a lodger while still living there yourself.
If, like Aisha, you moved out entirely and let the whole property, Letting Relief does not apply. This reform significantly increased the CGT bill for accidental and former-home landlords, and it is the single most common misunderstanding on this topic. Where it does apply, Letting Relief is the lowest of three figures: the PRR already given, the gain attributable to the letting, or £40,000.
PRR and the Capital Gains Tax annual exempt amount are two different reliefs that stack. PRR is applied first, removing the portion of the gain relating to your residence periods. The annual exempt amount, £3,000 for 2025/26, is then deducted from whatever taxable gain remains.
| Step | Effect (using Aisha's figures) |
|---|---|
| Total gain | £120,000 |
| Less PRR (69/96) | −£86,250 |
| Taxable gain before allowance | £33,750 |
| Less annual exempt amount | −£3,000 |
| Net taxable gain | £30,750 |
| CGT at 24% (higher rate) | £7,380 |
The annual exempt amount has been cut sharply in recent years, from £12,300 down to £6,000 and then to £3,000, so it now shelters far less of a residual gain than it once did. That makes PRR, and getting the qualifying-period calculation exactly right, more valuable than ever.
For any gain not covered by PRR, the residential property rates for 2025/26 are:
To work out which applies, you add the taxable gain to your income for the year. The gain effectively sits on top of your income, so a basic-rate taxpayer with a large gain can find part of it taxed at 18% and part at 24% as it pushes through the basic-rate ceiling.
A handful of circumstances reduce or remove PRR, and it is worth knowing them before you sell:
If PRR covers the entire gain, you have nothing to do: no report, no tax. If only part of the gain is relieved, the taxable portion must be reported and the tax paid within 60 days of completion through HMRC's online UK property service. This 60-day deadline is far tighter than the normal Self Assessment timetable and catches many sellers out, particularly former-home landlords who assumed the old, more generous reliefs still applied. Missing it brings penalties and interest, so the calculation is best done before you complete, not after.
Private Residence Relief makes selling your home tax-free for most people, but the moment a property has been let out, the rules sharpen fast. The nine-month final period, the narrowed Letting Relief, and the 60-day clock are where former-home landlords get caught.
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