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Principal Private Residence Relief

As originally announced in the 2018 Budget, changes to Capital Gains Tax (CGT) Principal Private Residence Relief (PPR) rules are due to take effect from 6 April 2020. We therefore felt that now might be a good time to provide a brief summary of the proposals.

Reduction of final period exemption

Under current rules, provided that a property has at some point been the owner’s only or main home, the last 18 months of ownership always qualifies for PPR relief, whether or not the owner remains living in the property during this period (in order to allow for practicalities of selling and moving).  From 6 April 2020, this 18 month exemption will be reduced to nine months, meaning that an additional nine months of gain may (if the owner is no longer in occupation of the property during this period) be subject to CGT.

Lettings relief

An extension to the relief, known as lettings relief, is currently available where a taxpayer’s property is let, as long as at some point during the ownership the property qualified for PPR relief. The portion of the ownership during which it was the owner’s main residence will attract PPR relief (plus 18 months or, from April 2020, nine months), and the remaining period can benefit from lettings relief (which is capped at £40,000).  From 6 April 2020, lettings relief will be reformed so that it only applies where the owner is in shared occupation with the tenant. The change to lettings relief means that, where the owner is not living in the property, no relief will be available beyond the period for which the property qualifies for PPR.

Of course, these changes could affect those that are planning on disposing of a home which they no longer occupy, or which has been let at some point during their period of ownership. In these circumstances, it may be worth considering a sale before April 2020 to take advantage of the 18 month final period exemption and the current lettings relief rules.

A consultation on the proposed changes closed on 1 June 2019, and the final legislation is expected to follow later this year.

The above comments are a brief summary of the proposed law changes, and we would therefore recommend that further advice be taken in advance of any transaction. If you would like to discuss the proposals in more detail, please speak to your usual Saffron contact, or get in touch via