Lettings Relief

Lettings relief allows you to reduce the amount of Capital Gains Tax (CGT) you pay when you sell a property that was:

• Your main home at one point in time
• Partly let out to a tenant while you also still lived there

Normally, you won’t need to pay CGT when you sell your main residence. You get something called Private Residence Relief (PRR). If you weren’t living there for a while or rented it all or a part of it out, you’ll have to pay CGT on any profits you make when you sell the property and won’t be eligible for the full PRR.

The Capital Gains Tax allowance for the 2024/25 tax year is £3,000. If you make less than this amount in profit, you don’t need to declare it to HMRC.

If you lived in your home at the same time as your tenants, you might qualify for the relief on any taxable capital gains you make when you sell the property

When you’re eligible for the relief, you can get whichever is the lowest of the following:

• The same amount you got in Private Residence Relief
• £40,000
• The same amount of profit you made while letting out a part of your home

You can’t use the lettings relief on profits made when the property was empty or fully let out.

Calculating your relief

Calculating how much lettings relief you could be eligible for requires some maths – but it’s doable!

Calculate the:

1. Total profit you made from selling the property
2. Number of years the property was your main residence vs. let out
3. % of years the property was your main residence vs. let out
4. Amount of profit you’re eligible for Private Residence Relief for (compared to the number of years the property was your main residence)
5. Leftover amount of profit you made from letting out the property
6. Choose the lowest of the 3 options for lettings relief