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Haines Watts Hereford Phone icon 01432 273189

One of the most topical issues to come out of the recently published Finance Bill is the changes to Principal Private Residence relief (PPR), which will have far reaching consequences for those effected, particularly those looking to dispose of a property in the coming year.

The key changes are the reduction of the final period of ownership exemption from 18 months to 9 months and the reform of lettings relief so that it only applies to those cases where the owner of the property shares occupancy with a tenant.



PPR excludes property from CGT where a person disposes of a house that has been used as their only or main residence. For individuals who move out of their residence, or subsequently let it out after residing in it, PPR will cover the gain arising during occupancy as well as the final 18 months. The final period of ownership was reduced from 36 months to 18 months in April 2014, now this will be further reduced to 9 months from April 2020.

Lettings relief is available for individuals who qualify for PPR and let out their property at some point during their ownership. The relief exempts the let period from CGT and can reduce the chargeable aspect of the gains by up to £40,000. Therefore, for those who have either resided or let a property throughout the entire ownership period, the total gain is unlikely to be subject to CGT unless the gain is significant.



The reduction in the final period of ownership will increase the CGT liability for those individuals who are disposing of a property which is no longer used as their main residence.

The reform of lettings relief will impact those individuals who have subsequently let out their main residence to tenants, as the relief will now be restricted to those that remain in the property as well.   In this scenario, owners would also be able to benefit from Rent-a-Room relief. Rent-a-Room relief provides a £7,500 tax-free allowance to rents received where the home owner lets out a room in their home.  If rent-a-room relief applies, it does not affect the availability of PPR relief when the owner comes to sell the property.



Peter bought a home in March 2010 and lived in it until March 2015, when it was subsequently let out.  As he is now thinking of selling the home next year, the changes above will affect his CGT liability depending if the property is sold before 6 April 2020. For a gain of £150,000, assuming there are no other disposals in the year and he is a higher rate taxpayer:

  • If Peter sells the house before the rule changes, he would then be able to claim PPR relief (includes the last 18 months) and Lettings relief, resulting in a CGT liability of £140;
  • If Peter sells the house after 6 April 2020, he will only be able to claim PPR relief (includes the last 9 months), resulting in a CGT liability of £14,550;

 The impact of the proposal changes would lead to an additional CGT liability of c. £14,000.

If you think you may be affected by the above and require any further discussion or explanation, please do not hesitate to contact Haines Watts.

Want to know more? Call us on 01432 273189 or email

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