Principal private residence relief ― basic principles

Produced by Tolley
Principal private residence relief ― basic principles

The following Personal Tax guidance note Produced by Tolley provides comprehensive and up to date tax information covering:

  • Principal private residence relief ― basic principles
  • Conditions for relief
  • Calculation of the relief
  • Deemed occupation
  • Non-qualifying tax years
  • Delay in taking up residence
  • Lettings relief
  • Conditions for lettings relief ― disposals on or after 6 April 2020
  • Conditions for lettings relief ― disposals prior to 6 April 2020
  • Effect of lodgers on PPR relief
  • More...

For an overview of PPR relief, see the Principal private residence (PPR) relief ― overview guidance note. This note summarises further guidance and provides links to further details.

Where an individual sells his only or main residence, generally the gain is exempt from capital gains tax (CGT) due to a relief referred to as the principal private residence (PPR) relief. PPR relief is not a statutory term but it is a phrase commonly used by tax professionals.

PPR relief may exempt all or part of a gain which arises on a property which an individual has used as his home. This is not a deferral relief; the gain is exempt, it does not come back into charge later.

The capital gain is calculated in the normal way, see the Basic calculation principles of capital gains tax guidance note. PPR relief (and possibly lettings relief, see below) is then deducted to arrive at the chargeable gain.

££
Proceeds of saleX
Less: costs of sale(X)
X
Cost or market value as at 31 March 1982 (MV82) if laterX
Plus: costs of acquisitionX
Plus: enhancement expenditureX
(X)
GainX
Less: PPR relief
(X)
Gain after PPR reliefX
Less: lettings relief (if due)(X)
Chargeable gainX

The mechanics of calculating PPR relief and lettings relief are discussed below.

For most taxpayers, any gain made on the sale of their home will be completely exempt as it will be wholly covered by PPR relief. However, a chargeable gain can arise if the taxpayer has been absent from the property at some point during his period of ownership (see below) or if he owns more than one residence.

Any loss on a residence which fully qualifies for PPR relief is not an allowable loss for CGT purposes. Therefore, an allowable loss can only arise in situations where full PPR relief is not available.

When contemplating PPR relief on the disposal of a property, you should consider the HMRC Capital gains tax for land and buildings toolkit. The toolkit provides guidance on the commonly occurring

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