Tax when you sell your home

When you sell an asset such as a property, any profit you make (referred to as a ‘gain’) will usually be subject to the capital gains tax (CGT) regime. However, if you are selling or giving away a property that you have lived in, you should be able to claim some Private Residence Relief (PPR).

The amount of relief you get is calculated as:

Gain x (period you live in the property/ total period of ownership) = PPR

In addition, the final nine months of ownership are treated as “deemed occupation”, i.e. as if you lived there, and therefore the last nine months are also exempt. There are other exemptions for deemed occupation such as if you were absent from the house because you were employed or working elsewhere. The final period exemption can remain at 36 months for disable people and long-term care home residents.

In addition to PPR, you may also be eligible for lettings relief because the property has been let out. Lettings relief is available for periods when the property was let for residential purposes, and you were in occupation of the property at the same time as the tenant. 

The maximum lettings relief you can claim is the lower of:

1. the amount of private residence relief you qualify for
2. the amount of profit you’ve made during the time your property was let out
3. or £40,000. Letting relief is available to each owner, rather than being available per property, so it is possible for a couple to claim a maximum of £40,000 each.

Lettings relief cannot create a loss, but it can reduce a gain to zero.

Most people are entitled to CGT annual exemption each tax year. The annual exemption works in a similar fashion to personal allowances for income tax purposes. Gains within the annual exemption are tax-free. The annual exemption for 2024/25 is £3,000.

Any taxable gain on this property would be subject to capital gains tax rates of 18% and 24% because it is residential property. 

We would be happy to discuss this with you in more detail and give you an estimate of your capital gains tax position. Please call 0141 632 1863 or contact us for more information.

Date published 6 Jul 2018 | Last updated 3 May 2024

This article is intended to inform rather than advise and is based on legislation and practice at the time. Taxpayer’s circumstances do vary and if you feel that the information provided is beneficial it is important that you contact us before implementation. If you take, or do not take action as a result of reading this article, before receiving our written endorsement, we will accept no responsibility for any financial loss incurred.