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3 scenarios for accessing PPR relief on a property sale

By RJP LLP on 8 August, 2018

Given that house prices remain high, principle private residence (PPR) relief is ever more valuable when selling a property. It can mean no capital gains tax is payable, or that the liability is significantly reduced, depending on individual circumstances.

Here are 3 scenarios that illustrate how a property sale might qualify for PPR relief or not, and the potential implications. It’s important to understand that you cannot have more than one PPR for tax purposes at any one time. If you own more than one property, your PPR will be the property which is factually your main home. If there is no clear distinction because you spend time alternately living at two or more properties, you can elect which of those properties you wish to be treated as your PPR. When doing so, it will be useful to consider tax planning scenarios.

  1. Selling your family home

This is the most straightforward scenario. If you sell the home you have lived in as your main residence since you acquired it, PPR relief will be available in full and no capital gains tax will be payable. There is no minimum period of ownership required provided the property has genuinely been your PPR throughout the period of ownership. The relief covers the sale of any gardens or grounds associated with the property and which are either up to 0.5 hectares or are a larger area that is in keeping with the house.


  1. Selling a property that was previously your home and then rented out

In this case you can expect PPR relief to be available for the period of ownership for which the property was your main residence plus the last 18 months of ownership. You may also be able to claim a lettings relief to further reduce the gain arising.

To establish the extent of the relief available, a timeline covering the period for which the property was owned, lived in by you and then rented, needs to be constructed. The time when you used the property as your home will qualify for PPR relief, together with the last 18 months of ownership; any period in between will be chargeable to capital gains tax.  There is a lettings relief which is available to reduce the gain arising on the sale of a property that has been both your PPR and has been rented out; this amount is the lesser of £40,000 (per owner) and an amount equal to the PPR relief claimed.


Worked example for scenario 2

Jane is a higher rate taxpayer; she bought a house for £500,000 and later sold it for £900,000. She owned the property for 12 years and lived there lived there for 6 years before renting it out until it was sold.

By including the exemption due for the last 18 months of ownership, Jane is entitled to PPR relief for 7.5 years.

  • The gain made on the sale is £400,000;
  • The PPR exemption is £ 250,000 (£400,000/12 x 7.5);
  • The chargeable gain is £150,000 but Jane can reduce this by using:
    • the lettings exemption of £40,000 (if PPR relief was less than £40,000, the lettings exemption would be restricted to an amount equal to the PPR relief); and
    • the annual capital gains tax exemption of £11,700.
  • (Note that if the house was owned by two people, they would each be able to claim lettings relief and the annual exemption against their own portion of the gain);
  • The taxable gain is therefore £98,300;
  • Capital gains tax for higher rate taxpayers is charged at the rate of 28%, so the capital gains tax liability is £27,524.


  1. Selling off land within a property that was/is your family home

This is a complex area and will vary depending on individual circumstances. If the property has always been your PPR and is simply sold with all its associated land up to 0.5 hectares, PPR will normally be available. For example, if Jane had 0.5 hectares of garden, had always used the property as her PPR and sought planning permission to build an additional self-contained property on her land before selling it to property developers, the sale would not attract capital gains tax.

However, if a part of the garden is sold separately to a developer, or if the amount of land attached to the property is greater than 0.5 hectares, claiming PPR relief is more difficult. It may be possible to apportion some of the gain in a similar way to the example above. In the case of land sales, specialist advice is needed to establish the individual circumstances, the sequence of events, and how the transaction will be viewed by HMRC. It will also be advisable to undertake tax planning well in advance of the transaction to achieve the best outcome.

As the increase in the value of your home is probably the only tax-free gain you will ever make, and given the level of capital appreciation often seen on property, ensuring you achieve the best outcome is extremely important. Recent cases have shown that HMRC do challenge claims, and obtaining early advice to enable you to plan ahead for a transaction is very worthwhile.

For practical advice on property tax, please contact Lesley Stalker by emailing

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