I sold a property in August this year that I originally purchased in 2002. I lived in it as my main residence from 2002 to 2007, at which point I moved in with my partner and we started letting the property out. It has been continuously let since then until the tenants vacated in June, and I sold it two months later.
The purchase price was £87,000 and the sale price was £215,000. I have receipts for approximately £14,000 of allowable improvements over the years (new kitchen, new bathroom, rewiring) which I understand I can deduct from the gain.
My understanding is that I am entitled to private residence relief for the five years I lived in it (2002 to 2007) plus the final nine months of ownership, which HMRC grants automatically. That would mean roughly 5.75 years out of a total ownership of approximately 23 years would be relieved.
What I am less sure about is lettings relief. I have read that the rules changed in April 2020 and that lettings relief now only applies if you were in shared occupation with the tenant, which I was not. So I believe I cannot claim it. But I have also seen older forum posts suggesting you can still claim it for the period before April 2020. I am not entirely sure I have this right.
I am also aware I need to report and pay within 60 days of completion, which means my deadline is mid-October. I have not yet submitted. Your opinions on whether my understanding of the reliefs is correct would be appreciated, particularly from anyone who has been through this recently.
I’ve been reading around this area myself so take this with the appropriate pinch of salt, but my understanding is that you get private residence relief for the years it was your main home (2002 to 2007 in your case) plus the final 9 months of ownership regardless of whether you were living there. That used to be 18 months but it was cut to 9 months a few years ago. So you’d be looking at roughly 5 years plus 9 months of relief out of a total ownership period of about 23 years, with the remainder being taxable.
The bit I’m less sure about is letting relief. I believe that was capped at £40,000 per person (i.e. not linked to the size of the gain) but I can’t remember whether that still applies to disposals after April 2020 or whether the rules changed again. Might be worth checking that specific point with HMRC or an accountant rather than relying on forum advice, given the sums involved.
@robert5678, thank you for taking the time to go through that. Your summary of the private residence relief broadly matches what I had worked out, which is reassuring. The bit I am still not entirely sure about is the lettings relief side. I let the property from 2007 through to the sale in August 2025, so eighteen years of letting. I know the rules changed in April 2020 so that lettings relief now only applies if you are in shared occupation with the tenant, which I was not. But prior to April 2020 the old, more generous lettings relief was available up to £40,000. My question is whether I can still claim that old lettings relief for the letting years before April 2020, or whether the restriction applies across the whole period once you come to sell. My accountant is looking into it but I would appreciate hearing from anyone who has actually dealt with this on a recent disposal.
@RWT54, I went back and had another look at this over the weekend because your question about the final period was nagging at me. I think the key thing you might be slightly off on is that the last 9 months of ownership are treated as deemed occupation regardless, but only if the property was your main residence at some point. Which in your case it was, so you should be fine on that front.
The complication (and I suspect this is what’s causing the confusion) is how HMRC treats any periods of letting during that deemed occupation window. There’s letting relief as well, which used to be quite generous but was capped at £40,000 from April 2020. Whether that helps you depends on the numbers.
One thing worth flagging, given the Budget is Wednesday. There has been some speculation that Reeves might adjust CGT rates or allowances. I’m not saying that changes your calculation for a disposal that already happened in August, but if there’s any question about reporting timelines it might be worth checking with your accountant sooner rather than later. I’m probably being overly cautious but the mood music isn’t great.