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Taxation (UK) · The use of exemptions and reliefs in deferring and minimising tax liabilities arising on the disposal of capital assets

Principal Private Residence Relief (PPR) for ACCA Taxation UK

Updated 11 October 2026 · Fact-checked

Principal private residence relief (PPR) exempts the gain on an individual's only or main home. If it was not the main home throughout, the exempt part is gain × (occupied + deemed occupation + final 9 months) ÷ total months owned. Only the remaining fraction is chargeable, before the annual exempt amount and CGT rates.

Understand Principal Private Residence Relief

A person's home is usually their biggest asset. Tax law does not want you taxed when you sell the home you live in, so a gain on a dwelling house that was your only or main residence throughout ownership is fully exempt. This is principal private residence relief, or PPR.

The exam usually tests the case where the house was not your home for the whole time. The gain is then split by time. You work in complete months. The exempt fraction covers three things: months you actually lived there, months treated as lived there (deemed occupation), and the final period of ownership, which is always the last 9 months. The rest of the gain is chargeable.

Deemed occupation applies to periods of absence only if you lived in the house as your main residence at some time before the absence and at some time after it. The periods are: any reasons, up to 3 years in total; working abroad, for any length of time; and working elsewhere in the UK where the employer's location stops you living there, up to 4 years in total. The "after" condition is waived if your work prevents you returning. There is also relief for up to the first 12 months of ownership while you build or renovate the house, if you then move in.

The final 9 months are exempt even if you have moved out and the house is empty or let. This applies as long as the house was your main residence at some time.

Two more points matter. If part of the home is used exclusively for business, the gain on that part is not exempt. And lettings relief is now narrow. It applies only where the owner shared the home with the tenant, for example a lodger. It is the lowest of the PPR-exempt gain, £40,000 and the gain relating to the letting. If you own two homes, you can elect which is your main residence, by notice to HMRC within 2 years of the combination first arising.

Key rules to remember

Exempt fraction of the gain
Exempt gain = Total gain × (actual + deemed occupation + final 9 months) ÷ total months of ownership
Work in whole months. Chargeable gain = total gain − exempt gain.
Final period
Last 9 months of ownership are always exempt
Needs the house to have been the main residence at some time. It applies even if the house is let or empty.
Deemed occupation: any reason
Up to 3 years in total
Needs actual occupation before and after the absence.
Deemed occupation: employed abroad
Any length
Needs actual occupation before and after the absence.
Deemed occupation: employer's UK location
Up to 4 years in total
The 'after' occupation is not needed if work stops you returning.
Part business use
Chargeable gain = Total gain × business proportion
Applies to part used exclusively for business. Use floor area or number of rooms.
Lettings relief
Lowest of: PPR-exempt gain; £40,000; gain attributable to the letting
Only where the owner shared occupation with the tenant.
CGT on residential gains
Annual exempt amount £3,000; rates 18% and 24%
Taken from the ACCA tax rates provided. Deduct the annual exempt amount before applying the rate.

How to solve Principal Private Residence Relief questions

Use this order for any PPR question. Most marks come from the month analysis.

  1. 1Compute the total gain: proceeds less cost and allowable costs.
  2. 2List the ownership period in whole months from purchase to sale.
  3. 3Split the timeline into periods: living there, absent, let, empty.
  4. 4For each absence, decide whether it is deemed occupation. Check the reason, the length limit, and occupation before and after.
  5. 5Add the final 9 months, which are exempt regardless. Do not count the same months twice.
  6. 6Add up the exempt months. Chargeable gain = total gain × non-exempt months ÷ total months.
  7. 7Deal with part business use or lettings relief if the facts give them.
  8. 8Deduct the annual exempt amount of £3,000 and any losses, then apply 18% or 24% depending on the person's income.

Quickest way: Month grid shortcut

When to use it: Use for objective test questions and for the first part of a Section C question.

  1. Write the total months owned.
  2. Count the non-exempt months directly: months that are neither occupied, deemed occupied nor in the final 9.
  3. Work out the chargeable gain as gain × non-exempt months ÷ total months.
  4. Check that the exempt and non-exempt months add up to the total.

Common mistakes in Principal Private Residence Relief

  • Treating an absence as deemed occupation when the owner never lived in the house before it.

    Students remember the time limits but forget the condition of actual occupation before and after.

    Fix: Check the occupation test first, then apply the time limit.

  • Applying the 3-year, 4-year and abroad limits as if each gave a separate full allowance.

    The limits look like separate entitlements.

    Fix: The 3-year and 4-year limits are totals. Allocate months to the most generous category, and do not exceed the cap.

  • Forgetting the final 9 months, or treating them as 18 months.

    Older material used 36 months, and some students remember a different figure.

    Fix: The final period is 9 months, and it is exempt whatever the use of the property.

  • Giving lettings relief whenever a house was let.

    Students remember the old rule.

    Fix: Only give lettings relief where the owner shared occupation with the tenant. For a wholly let house, no relief.

  • Forgetting to deduct the annual exempt amount before calculating tax.

    Attention goes to the PPR fraction.

    Fix: After PPR, deduct £3,000, then apply 18% or 24% as appropriate.

  • Making the whole house chargeable because part of it is used for business.

    Students overstate the rule.

    Fix: Only the part used exclusively for business is chargeable. A room used for both home and work is not caught.

Worked examples

Example 1

Mia bought a house on 1 July 2010 and sold it on 31 December 2025, realising a gain of £240,000 before reliefs. She lived there from 1 July 2010 to 30 June 2014, worked abroad from 1 July 2014 to 30 June 2019 (the house was empty), lived there again from 1 July 2019 to 30 June 2024, then moved out. The house stayed empty until sold. She is a higher rate taxpayer and has no losses. Calculate her CGT.

Show the solution
  1. Total ownership: 1 July 2010 to 31 December 2025 = 15 years 6 months = 186 months.
  2. Actual occupation: 48 months (2010–14) plus 60 months (2019–24) = 108 months.
  3. Absence abroad: 60 months. Mia lived in the house before and after, and was employed abroad, so all 60 months are deemed occupation.
  4. Final 9 months, 1 April 2025 to 31 December 2025, are exempt.
  5. Months from 1 July 2024 to 31 March 2025 are 9 months. They are not occupied, not deemed and not final, so they are not exempt.
  6. Check: 108 + 60 + 9 = 177 exempt months, plus 9 non-exempt months = 186.
  7. Chargeable gain = £240,000 × 9 ÷ 186 = £11,613.
  8. Less annual exempt amount £3,000 = £8,613 taxable.
  9. CGT at 24% = £2,067.

Answer: Chargeable gain £11,613; CGT payable £2,067.

Example 2

Raj sold his home for a gain of £90,000. He owned it for its whole ownership and lived in it throughout. One of its six equal-sized rooms was used exclusively as an office for his business throughout. He is a higher rate taxpayer with no other gains. Calculate the CGT.

Show the solution
  1. The house was his main residence for the entire ownership, so PPR applies, but not to the part used exclusively for business.
  2. Business proportion = 1 room out of 6 equal rooms = 1/6.
  3. Chargeable gain = £90,000 × 1/6 = £15,000.
  4. Less annual exempt amount £3,000 = £12,000 taxable.
  5. CGT at 24% = £2,880.

Answer: Chargeable gain £15,000; CGT payable £2,880.

Exam tips

  • Always build a month-by-month timeline. Show the total months, exempt months and chargeable months, because marks are given for each.
  • Look for the trigger words 'working abroad', 'employer required' and 'for any reason'. They tell you which deemed occupation limit applies.
  • The final 9 months are given even when the owner has moved out. Make sure you include them.
  • Lettings relief appears only in shared-occupation cases. If a question describes a whole house let to tenants, say that no lettings relief is due.
  • In objective questions, the usual wrong answers come from using the wrong number of months or forgetting the final 9 months. Recompute the fraction before you pick.

Practice questions from The use of exemptions and reliefs in deferring and minimising tax liabilities arising on the disposal of capital assets

Principal Private Residence Relief in other exams

The same ground in other exams, if you are preparing for more than one or want another angle on it.

Principal Private Residence Relief: frequently asked questions

What is the final 9 months rule for PPR?

The last 9 months of ownership are treated as exempt, even if you have moved out and the house is empty or let. It applies as long as the house was your main residence at some time.

How is PPR relief calculated when the owner was absent?

Work out the total gain and the whole months of ownership. Add actual occupation, deemed occupation and the final 9 months. The exempt gain is the total gain multiplied by that number of months over the total months owned.

What is the difference between PPR relief and lettings relief?

PPR exempts the gain for the time the house was your main home, including deemed occupation and the final 9 months. Lettings relief is now only available where you shared the home with a tenant, and it is capped at the lowest of three amounts, including £40,000.

Does PPR still apply if I use part of my home for business?

Yes, but not to the part used exclusively for business. The gain on that part is chargeable, usually by floor area or number of rooms.