Advanced Taxation (UK) · Capital gains tax: the use of exemptions and reliefs in deferring and minimising tax liabilities

Private Residence Relief, Chattels and Gifts to Charity for CGT

Updated 11 October 2026 · Fact-checked

Private residence relief exempts the gain on your only or main home for periods of actual or deemed occupation, including the final 9 months. The chattels exemption removes gains on items sold for £6,000 or less. Gifts to spouses and charities are no gain, no loss. You time-apportion, then apply each exemption.

Understand Exemptions: Principal Private Residence, Chattels and Gifts to Charity

Capital gains tax (CGT) is charged on gains, but some assets and disposals are outside it. In ATX-UK you are asked which exemption applies, how much gain is left and how to plan around it.

Private residence relief (PPR) exempts the gain on a dwelling that has been your main residence. The gain is time-apportioned. The exempt fraction is the months of occupation, plus deemed occupation, plus the final period, divided by total months of ownership. The garden and grounds are included up to 0.5 hectare, or more if the size is justified by the character of the house.

Some absences count as deemed occupation, but only if the house was your main residence before and after (with exceptions where work stops you returning). Any reason: up to 3 years in total. Employed abroad: any length. Employed elsewhere in the UK: up to 4 years. The final period is the last 9 months of ownership. It is exempt even if you had moved out, provided the property was your main residence at some point. Letting relief now applies only where the owner shared occupation with the tenant, and is limited to £40,000. If you let the whole house, there is no letting relief.

Chattels are tangible movable items such as paintings, jewellery and furniture. A chattel sold for gross proceeds of £6,000 or less is exempt. Above £6,000 the gain is capped at 5/3 of the excess over £6,000. A loss is restricted by treating proceeds as £6,000. A wasting chattel (life of 50 years or less) is exempt whatever the price. Items forming a set are treated as one disposal if sold to the same buyer.

No gain, no loss transfers apply between spouses or civil partners living together, and on gifts to qualifying charities. The receiver takes over the giver's original cost and date. This helps planning: you can move an asset to the spouse who has an unused annual exempt amount (£3,000) or a lower rate band (18% against 24%), or give to charity with no CGT.

Key rules to remember

PPR exempt fraction: Exempt gain = Gain × (actual + deemed occupation + final period months) ÷ total months owned; Months are counted from acquisition. Use whole months as the exam instructs: apportion to the nearest month.
Final period: Last 9 months of ownership are always treated as occupied; Applies if the property was the main residence at some time. Do not use it for months already counted elsewhere.
Deemed occupation limits: Any reason: up to 3 years. Employed abroad: any length. Employed elsewhere in UK: up to 4 years; Needs actual occupation before and after the absence, unless work prevents returning. Some exceptions apply.
Letting relief: Lowest of: £40,000; PPR exempt gain; gain from letting; Only where the owner shared occupation with the tenant. Not available if the whole property is let.
Chattel exemption: Proceeds £6,000 or less: exempt; Applies to each item or set. Wasting chattels with a life of 50 years or less are exempt.
Chattel marginal relief: Maximum gain = 5/3 × (Proceeds − £6,000); Gain is the lower of the normal gain and this cap.
Chattel loss restriction: Loss = Cost − £6,000 (deemed proceeds) where proceeds are below £6,000; Only relevant when cost is over £6,000.
Spouse and charity transfers: Deemed proceeds = cost (no gain, no loss); Spouses must be living together in the tax year. Recipient inherits cost and acquisition date.
CGT rates and exempt amount: 18% lower rate; 24% higher rate; annual exempt amount £3,000; Taken from the tax tables given in the exam. Use 18% only to the extent of unused basic rate band.

How to solve Exemptions: Principal Private Residence, Chattels and Gifts to Charity questions

Use this order for any question on exemptions in ATX-UK. It keeps the time apportionment tidy and stops you missing marks for the final period or for chattel limits.

1Identify the asset and the disposal: house, chattel, shares or a gift to a spouse or charity. Decide if the disposal is exempt, no gain/no loss, or needs a computation.
2For a spouse or charity gift, state no gain/no loss, give the recipient's cost and date, and note the tax effect of using the recipient's allowances or rate band. Check the spouses are living together.
3For a house, compute the total gain first: proceeds less cost and allowable costs.
4Draw a timeline from acquisition to sale. Label each period as actual occupation, deemed occupation, let, vacant or final 9 months.
5Count exempt months: actual, qualifying deemed occupation and the final 9 months. Check the deemed periods meet the time limits and the before-and-after occupation condition.
6Apply the fraction to the gain to find the exempt part. Then see if letting relief is available (shared occupation only).
7For chattels, check the £6,000 proceeds limit, then the 5/3 cap, then the loss restriction. Check whether the asset is wasting.
8Deduct losses and the £3,000 annual exempt amount, then apply 18% or 24% depending on the band available. State the tax.

Quickest way: Timeline-and-fraction shortcut

When to use it: Use this when a house question gives several occupation and absence periods and time is short.

Write total months owned at the top and mark the sale date.
Count back 9 months from the sale and mark them exempt first.
Tick actual occupation periods, then test each absence against the 3-year, abroad and 4-year rules.
Add exempt months, write them over total months, and multiply by the gain.
For chattels, test £6,000 first. If proceeds are above it, calculate 5/3 × excess and take the lower figure.

Common mistakes in Exemptions: Principal Private Residence, Chattels and Gifts to Charity

Forgetting the final 9 months when the house was let or empty at the end
Students focus on the occupation dates and ignore the final period rule.
Fix: Always count back 9 months from the sale date and treat them as exempt, if the house was ever the main residence.
Giving letting relief when the whole house was let
Students remember the old rule where letting relief applied to any letting.
Fix: Letting relief applies only where the owner shared occupation with the tenant. Cap it at £40,000.
Treating a gift to a spouse as a taxable disposal at market value
Gifts between connected persons are normally at market value, so students apply that rule here.
Fix: Spouses living together transfer at no gain, no loss. The recipient takes the original cost and date.
Applying the 5/3 cap when it gives a bigger gain than the normal computation
Students apply the formula automatically.
Fix: Compute both and take the lower gain. The cap is a relief, not a formula to apply blindly.
Exceeding the deemed occupation limit without checking
Students treat every absence as covered.
Fix: Track the total of 'any reason' absence up to 3 years, and treat employed-abroad and UK-employment periods under their own rules.
Letting a loss on a chattel run at the full amount
Students ignore the deemed proceeds of £6,000.
Fix: If proceeds are under £6,000, replace them with £6,000 when computing the loss.

Worked examples

Example 1

Priya bought a house on 1 July 2015 for £300,000 and sold it on 30 June 2025 for £600,000. She lived in it from 1 July 2015 to 30 June 2018. She was employed abroad from 1 July 2018 to 30 June 2020 and lived in it again from 1 July 2020 to 30 June 2022. She then let the whole house from 1 July 2022 to 30 September 2024 and it was empty until sold. Assume costs of sale are nil. She has no other gains and is a higher rate taxpayer. Compute her CGT.

Show the solution

Total gain = £600,000 − £300,000 = £300,000.
Total ownership = 10 years = 120 months.
Actual occupation: 36 months (July 2015 to June 2018).
Deemed occupation: 24 months (employed abroad, and she lived in the house before and after).
Actual occupation: 24 months (July 2020 to June 2022).
Let period: 27 months (July 2022 to September 2024). Not exempt, as the whole house was let. No letting relief.
Empty period: 9 months (October 2024 to June 2025) is the final period, so it is exempt.
Exempt months = 36 + 24 + 24 + 9 = 93. Check: 93 + 27 = 120.
Chargeable gain = £300,000 × 27 ÷ 120 = £67,500.
Less annual exempt amount £3,000 = £64,500.
CGT at 24% = £15,480.

Answer: Chargeable gain £67,500; taxable gain £64,500; CGT £15,480.

Example 2

Tom sold a painting for £9,000 which cost him £2,000. He also sold a vase for £4,000 which cost him £7,500. Both were bought and sold by him as an individual. Compute the gain or allowable loss on each item.

Show the solution

Painting: proceeds £9,000 are over £6,000, so the exemption does not apply in full.
Normal gain = £9,000 − £2,000 = £7,000.
Marginal relief cap = 5/3 × (£9,000 − £6,000) = 5/3 × £3,000 = £5,000.
Take the lower: £5,000.
Vase: proceeds £4,000 are under £6,000. Normal loss = £4,000 − £7,500 = £3,500.
Loss restriction: replace proceeds with £6,000. Loss = £6,000 − £7,500 = £1,500.
The vase is a chattel, so the loss is allowable at £1,500, and can be set against the painting gain.

Answer: Painting gain £5,000; vase allowable loss £1,500. Net chargeable gain before the annual exempt amount £3,500.

Exam tips

Draw the timeline first. Marks are for each period classified correctly, so show the months for each period.
State the condition for each deemed occupation period, for example employed abroad, and say whether it is met.
In planning questions, mention that moving assets to a spouse costs no tax and lets you use both annual exempt amounts and a lower rate band.
Show both computations for a chattel and say which is lower. Write the £6,000 test explicitly.
Use the tax tables for the rates and the £3,000 exempt amount. Do not rely on memory for letting relief or the 9-month period; state them as rules in your answer.

Practice questions from Capital gains tax: the use of exemptions and reliefs in deferring and minimising tax liabilities

Exemptions: Principal Private Residence, Chattels and Gifts to Charity in other exams

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

ACCA Applied SkillsPrincipal Private Residence Relief

Exemptions: Principal Private Residence, Chattels and Gifts to Charity: frequently asked questions

How is the final period exemption calculated for private residence relief?

The last 9 months of ownership are treated as periods of occupation, as long as the property was your main residence at some time. You add 9 months to your other exempt months and divide by total months of ownership. It applies even if you had already moved out and the house was let or empty.

What does deemed occupation mean for PPR?

It means certain absences are treated as if you lived in the house. These are up to 3 years for any reason, any period if employed abroad, and up to 4 years if employed elsewhere in the UK. You must normally have lived in the house before and after, although there are exceptions where work stops you returning.

How does the £6,000 chattels exemption work?

If the sale proceeds of a chattel are £6,000 or less, any gain is exempt. If proceeds are higher, the gain is the lower of the normal gain and 5/3 of the excess over £6,000. For losses, proceeds are treated as £6,000 if they are actually lower.

Is a transfer to my spouse subject to CGT?

Not if you are living together as spouses or civil partners in that tax year. The transfer is at no gain, no loss, so your spouse takes your cost and acquisition date. CGT arises only when your spouse later sells to a third party.