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Advanced Taxation (UK) · Capital gains tax: gains and losses on the disposal of movable and immovable property

Private Residence Relief, Deemed Occupation and 60-Day CGT Reporting

Updated 11 October 2026 · Fact-checked

Private residence relief (PRR) exempts the part of a gain on your main home that matches the months it was your residence. Deemed occupation and the final 9 months count as occupied. PRR = gain × exempt months ÷ total months. If CGT is due on UK residential property, report and pay within 60 days of completion.

Understand Residential Property, Private Residence Relief and Reporting

A gain on your only or main home is normally exempt. Private residence relief (PRR) gives this exemption. It works by time. You work out how much of your period of ownership the property was your main residence, and that fraction of the gain is exempt.

Most exam questions involve a property that was not a home for the whole period. Some periods count as occupied even though you were not there. These are deemed occupation. The last 9 months of ownership also count as exempt, whatever the use at that time. This is the final period exemption. It is longer (36 months) only for a disabled person or a person in a care home who meets the conditions.

Letting relief is now narrow. It applies only where the owner shared occupation of the home with the tenant. It is the lowest of £40,000, the PRR amount and the gain attributable to letting. If the whole property was let out, there is no letting relief. Most ATX questions now test whether you spot this.

If you own more than one home, you can nominate which is your main residence. The election must be made within 2 years of a change in the combination of residences. If you do not elect, HMRC decides on the facts. The garden and grounds are exempt up to 0.5 hectares, unless a larger area suits the size and character of the house.

The gain left after PRR is taxed at 18% or 24%, depending on how much basic rate band you have left, after the £3,000 annual exempt amount. When CGT is due on a UK residential property disposal, you must file a return and pay the tax on account within 60 days of completion. You do not wait for the self-assessment return.

Key rules to remember

PRR fraction
PRR = Gain × (Exempt months ÷ Total months of ownership)
Total months run from acquisition to disposal. Apportion to the nearest month, as the exam instructions say.
Exempt months
Actual occupation + deemed occupation + final 9 months
Do not count the final 9 months twice if they overlap with actual or deemed occupation.
Final period exemption
Last 9 months of ownership always exempt (36 months for disabled persons and care home residents meeting the conditions)
It applies if the property was the main residence at some point.
Deemed occupation periods
Any reason: up to 3 years in total. Employed outside the UK: any length. Employed elsewhere in the UK: up to 4 years.
You must have lived in the property before and after the absence. The 'after' test is waived if your work stopped you returning. The periods are not consecutive tests.
Letting relief
Lowest of: £40,000; PRR amount; gain attributable to letting
Only where the owner shared occupation with the tenant. Not available for whole-property lets.
CGT rates and AEA
Annual exempt amount £3,000; 18% within unused basic rate band; 24% above
Rates for 2025/26 as given in the tax tables. The question gives the income needed.
60-day rule
Return and payment on account due within 60 days after completion of a UK residential property disposal with CGT payable
Completion date, not contract date, starts the clock for the sale.

How to solve Residential Property, Private Residence Relief and Reporting questions

Use this order for any PRR question. It keeps the time line clean and shows the marker each mark.

  1. 1Compute the total gain: proceeds less cost and allowable costs. Do this before any relief.
  2. 2Draw a time line in months from acquisition to disposal. Count total months of ownership.
  3. 3Mark each period: actual occupation, absence and use (let, empty, abroad, working elsewhere).
  4. 4Decide which absences are deemed occupation. Check the before and after occupation tests and the time limits.
  5. 5Add the final 9 months. Check they do not overlap months already counted.
  6. 6Calculate PRR = gain × exempt months ÷ total months. Then consider letting relief, only if the owner shared the home with the tenant.
  7. 7Deduct the annual exempt amount, then apply 18% and 24% using the basic rate band left.
  8. 8State the 60-day reporting deadline from completion, and the payment due with the return.

Quickest way: Month-count shortcut

When to use it: When the property has several different periods and you need a fast, mark-safe layout.

  1. Write total months at the top, for example 120.
  2. List each period in a column with its months and a tick or cross for exempt.
  3. Add the ticks and the final 9 months. Check the total never exceeds the months in the line.
  4. Compute PRR once as gain × ticks ÷ total.
  5. Write one line saying why letting relief is or is not available.
  6. Finish with tax and the 60-day date. Count the date from completion.

Common mistakes in Residential Property, Private Residence Relief and Reporting

  • Giving letting relief when the whole property was let out.

    Older study notes gave letting relief for any let. The rule changed.

    Fix: Check whether the owner shared occupation with the tenant. If not, there is no letting relief.

  • Forgetting the final 9 months, or adding it on top of months already exempt.

    Students treat it as an extra instead of part of the time line.

    Fix: Mark the last 9 months on your time line first, then count only the months not already exempt.

  • Treating every absence as deemed occupation.

    Students remember the 3-year and 4-year limits but skip the before-and-after occupation test.

    Fix: State the test in your answer and say whether the owner lived in the property before and after the absence.

  • Using the wrong denominator by counting months from a different date.

    Students start from first occupation or from the contract date.

    Fix: Use total months of ownership from acquisition to disposal.

  • Missing the 60-day return and payment point.

    Students stop once the CGT figure is calculated.

    Fix: Always add the deadline: 60 days after completion, with the tax payable on account. Say a return is needed only if CGT is due.

  • Applying PRR before the gain is computed, or deducting the AEA before PRR.

    Wrong order of steps under time pressure.

    Fix: Gain, then PRR, then letting relief if any, then the AEA, then the tax rate.

Worked examples

Example 1

Priya bought a house on 1 July 2015 and lived in it as her only home until 30 June 2019. She then let the whole house to tenants until she sold it on 30 June 2025 (completion date). The gain before relief is £180,000. She is a higher rate taxpayer. Compute the CGT and state when the return is due.

Show the solution
  1. Total ownership: 1 July 2015 to 30 June 2025 = 120 months.
  2. Actual occupation: 1 July 2015 to 30 June 2019 = 48 months.
  3. Letting period: 72 months. Not deemed occupation, as she did not return to live there.
  4. Final period: last 9 months are exempt. This is part of the letting period, so add 9 months.
  5. Exempt months = 48 + 9 = 57.
  6. PRR = £180,000 × 57 ÷ 120 = £85,500.
  7. Letting relief: nil. The whole house was let, so the owner did not share occupation with the tenant.
  8. Chargeable gain = £180,000 − £85,500 = £94,500.
  9. Less annual exempt amount £3,000 = £91,500.
  10. Higher rate taxpayer: tax = £91,500 × 24% = £21,960.
  11. Deadline: 60 days after completion on 30 June 2025 is 29 August 2025. File the return and pay the tax by then.

Answer: CGT is £21,960. The return and payment are due by 29 August 2025.

Example 2

Tom bought a house on 1 January 2016 for £300,000 and sold it on 31 December 2025 (completion) for £450,000. He lived there from 1 January 2016 to 31 December 2017. He worked abroad from 1 January 2018 to 31 December 2019. He lived there again from 1 January 2020 to 31 December 2021. From 1 January 2022 the whole house was let. Ignore costs of acquisition and disposal. He has £10,000 of basic rate band left after other income. Compute the CGT and the reporting deadline.

Show the solution
  1. Gain = £450,000 − £300,000 = £150,000.
  2. Total ownership: 1 January 2016 to 31 December 2025 = 120 months.
  3. Actual occupation: 24 months (2016-17) + 24 months (2020-21) = 48 months.
  4. Absence abroad for 24 months: employed outside the UK, so deemed occupation. He lived there before and after, so the conditions are met.
  5. The 48 months of letting after 2021 are not deemed occupation, except for the final 9 months.
  6. Exempt months = 24 + 24 + 24 + 9 = 81.
  7. PRR = £150,000 × 81 ÷ 120 = £101,250.
  8. Letting relief: nil. The whole house was let.
  9. Chargeable gain = £150,000 − £101,250 = £48,750. Less AEA £3,000 = £45,750.
  10. Tax: £10,000 × 18% = £1,800. £35,750 × 24% = £8,580. Total £10,380.
  11. Deadline: 60 days after 31 December 2025 is 1 March 2026. File the return and pay by then.

Answer: CGT is £10,380. The return and payment are due by 1 March 2026.

Exam tips

  • Draw the month time line first. Most marks come from classifying each period correctly, and a clear line lets you earn follow-through marks.
  • Name the rule you are using in each line, such as deemed occupation or final period, and state its condition. Markers award marks for the reason.
  • If a scenario involves letting, check at once whether the owner shared the home. Say clearly why letting relief is or is not available.
  • Always finish with the 60-day return and payment point when the property is UK residential and tax is due. It is an easy mark that students forget.
  • Where there are two homes, look for an election within 2 years of the change. Advise on which home to nominate, based on which has the larger gain.

Practice questions from Capital gains tax: gains and losses on the disposal of movable and immovable property

Residential Property, Private Residence Relief and Reporting in other exams

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

Residential Property, Private Residence Relief and Reporting: frequently asked questions

What is the final period exemption for private residence relief?

The last 9 months of ownership are treated as exempt, provided the property was the owner's main residence at some point. The period is 36 months for a disabled person or someone in a care home who meets the conditions.

Is letting relief still available?

Only in a narrow case. The owner must have shared occupation of the home with the tenant. Relief is the lowest of £40,000, the PRR amount and the gain attributable to letting. If the whole property was let, there is no letting relief.

When must I report and pay CGT on a UK residential property sale?

Within 60 days after completion, where CGT is payable. You file a return and pay the tax on account. If the gain is fully covered by PRR or the annual exempt amount, no tax is due on the sale.

How does the main residence election work?

If you have more than one home, you can nominate which is your main residence. You must elect within 2 years of a change in the combination of your residences. If you do not, HMRC decides based on the facts.