If you lived in a home and then let it out, you do not lose private residence relief altogether. The years you lived there stay exempt, the last 9 months of ownership are always exempt, and some time away can count as if you had lived there. The rest of the gain is taxable. Lettings relief no longer helps anyone who let the whole property, and any tax is due within 60 days of completion.
How the relief is worked out
If the property was your only or main residence for the whole time you owned it, the entire gain is exempt. If it was not, the exempt share of the gain is a fraction:
- Top of the fraction: the time it was your main residence, plus the final 9 months of ownership, plus any absence that the rules treat as occupation.
- Bottom of the fraction: your total period of ownership.
The final 9 months count whatever you were doing with the property, as long as it was your main residence at some point. If you are disabled or a long-term care home resident when you sell, and you (and any spouse or civil partner) have no other home that could qualify, the final period is 36 months instead.
Absences that count as living there
Section 223(3) treats some periods away as occupation. They can be added together, and it does not matter that the home was let while you were away:
- Any reason: up to 3 years in total.
- Work elsewhere in the UK: up to 4 years in total where the location of your job, or a reasonable condition set by your employer, meant you could not live there. HMRC accepts this for the self-employed too.
- Employment abroad: any length, provided all the duties of the job were carried out outside the UK. This also covers living with a spouse or civil partner in that position.
There are two conditions. The property must have been your main residence at some time before the absence, and you must genuinely live in it again at some time afterwards. For the two work-related categories, the second condition is relaxed if your job (or your spouse's) stopped you returning. The final 9 months do not count as moving back in.
This catches many accidental landlords. If you moved in with a partner, let the flat and never returned, the 3-year rule does not apply at all.
A worked example
Priya buys a flat for £300,000 in September 2016 and lives in it. In September 2020 she moves in with her partner and lets the flat. She sells in September 2026 for £450,000. Buying and selling costs total £10,000, so her gain is £140,000. She owned it for 120 months (we use whole months for simplicity; a real computation uses exact dates).
Version A, she never moves back. Exempt months are the 48 she lived there plus the final 9: 57. Relief is £140,000 × 57 ÷ 120 = £66,500, leaving a chargeable gain of £73,500.
Version B, she moves back in. She lets for 60 months, then returns in September 2025 and lives there as her home until the sale. Of the 60 months away, 36 count under the 3-year rule. Exempt months are 48 + 36 + 12 = 96 (the final 9 months fall inside her last 12). Relief is £140,000 × 96 ÷ 120 = £112,000, leaving £28,000.
| Version A | Version B | |
|---|---|---|
| Exempt months out of 120 | 57 | 96 |
| Private residence relief | £66,500 | £112,000 |
| Chargeable gain | £73,500 | £28,000 |
| Less annual exempt amount | £3,000 | £3,000 |
| Tax at 24% | £16,920 | £6,000 |
The 24% rate applies to gains in 2026/27 for higher and additional rate taxpayers. If Priya's taxable income left part of the £37,700 basic rate band unused, that part of the gain would be taxed at 18%. The move back must be real: HMRC looks at the quality of occupation, not a set number of months, and a short stay to tick a box is likely to be challenged.
Lettings relief since April 2020
Before 6 April 2020, lettings relief could shelter up to £40,000 of gain for anyone who had let their former home. For disposals on or after that date it only applies where you let part of the property while you were living there yourself. It gives nothing for periods when the whole property was let. Where it does apply, it is the lowest of the private residence relief you get, £40,000 and the gain that arises because of the letting.
A lodger sharing your living space, or a child or parent living with you and paying rent, does not restrict the relief at all.
Two homes, couples and nominations
If you genuinely have two residences at the same time, you can tell HMRC which one is your main residence. The notice must normally be given within 2 years of the start of that combination of homes, for example within 2 years of buying a second place. You must sign it yourself (an agent's signature is not enough), and a married couple or civil partners living together must both sign. A home that is fully let to tenants is not your residence, so it cannot be nominated.
A married couple or civil partners living together can have only one main residence between them. If you each owned a home when you married and both were still used as homes, a joint nomination within 2 years of the marriage can matter.
If you live abroad
Non-residents pay capital gains tax on UK residential property. Usually only the gain since 5 April 2015 is taxed, unless an election is made to use the whole period. Every disposal of UK property must be reported within 60 days, even if no tax is due.
For private residence relief, a tax year in which neither you nor your spouse or civil partner is UK resident is treated as a year you did not live in the property, unless you (or they) spend at least 90 nights that year in the home or another UK home that either of you owns. The overseas employment rule above can still help in some cases. See our guide for non-resident landlords.
The income tax side while it is let
- Permission to let: if there is a mortgage, you need your lender's consent before letting.
- Self Assessment: rents above the £1,000 property allowance must be declared, and once profits pass £2,500 or gross rents pass £10,000 that means a tax return. If you do not already file one, register by 5 October after the tax year in which the rent started. Our guides on landlord allowable expenses and renting out a property while employed cover the detail.
- Making Tax Digital: if your gross rents plus any self-employment turnover were over £50,000 in 2024/25, you should already be using MTD from 6 April 2026. If they were over £30,000 in 2025/26, you must use MTD from 6 April 2027. The threshold falls to £20,000 for 2026/27 income, with entry from 6 April 2028. Salary, pensions and dividends do not count. See our MTD guide.
- New rates: Finance Act 2026 sets property income rates of 22%, 42% and 47% for 2027/28. For Scottish and Welsh taxpayers, the Scottish Parliament and the Senedd set the property rates. See property income tax rates from April 2027.
Selling, and the 60-day deadline
UK residents must report the sale and pay any tax due on a UK home within 60 days of completion, using HMRC's online UK property service. If you are UK resident and there is no tax to pay, for example because relief covers the whole gain or what is left is within the £3,000 annual exempt amount, you do not need a 60-day return. The sale also goes on your Self Assessment return if you file one. For the wider rules on let property, read our guide to selling a buy-to-let.
What to do now
- Write down the dates: purchase, moving out, any return, and the expected sale.
- Keep evidence of where you lived and of your purchase, improvement and sale costs.
- If you moved for work, keep your employer's letters showing why you could not live there.
- Check whether you need to register for Self Assessment or join Making Tax Digital.
- Have the relief calculated before you agree a sale.
Our property tax service covers relief calculations and 60-day returns. If you have let your former home, book a consultation and we will work out how much relief you keep and what you will owe on a sale.
This article is general information about UK tax, based on the law and HMRC practice at the date shown above. It is not advice, and reading it does not make you our client. Tax rules change and their effect depends on your circumstances, so please speak to us before acting on it.