Private Residence Relief and Letting: Do You Pay CGT If You Lived in the Property First? (UK Landlords 2025/26)

You bought a place.
You lived in it.
Then life happened, new job, new partner, move abroad and it turned into a rental.

Fast-forward to 2025/26 and you’re thinking of selling. Suddenly your search history looks like:

  • “Do I pay Capital Gains Tax if I lived in the property first?”
  • “Private Residence Relief if you let out your home”
  • “Does lettings relief still exist in 2025?”

And everyone you ask says something different.

This guide is written for UK landlords who:

  • Lived in a property originally and later let it out, or
  • Still live there but rent rooms to lodgers / housemates, or
  • Have had periods working away while the property was let.

We’ll cover, in plain English:

  • How Private Residence Relief (PRR) actually works in 2025/26 and 2026/27
  • What changed with lettings relief from 6 April 2020
  • How to work out what slice of your gain is exempt if you’ve let the property
  • How all of this ties into the 60-day CGT report when you sell

All facts are based on GOV.UK guidance and the current HS283 Private Residence Relief helpsheet.

If you just want the general CGT picture first, read this alongside your Capital Gains Tax on Rental Property UK Landlords’ Guide.

1. Quick recap: what is Private Residence Relief?

Private Residence Relief (PRR) is the Capital Gains Tax relief that usually means you do not pay CGT when you sell your only or main home.

You normally get full PRR (100% of the gain exempt) if all of the following apply:

  • You have one home and you’ve lived in it as your main home for all the time you’ve owned it
  • You have not let out any part of it (beyond a lodger who shares your living space)
  • You have not used part of it exclusively for business
  • The grounds (including all buildings) are less than 5,000 m²
  • You did not buy it just to realise a gain

If that’s you, you can relax, there’s usually no CGT on sale and this article is probably more detail than you need.

Most landlords, though, fall into partial relief territory:

  • You moved out and then let the whole property
  • You still live there but rent rooms
  • You had periods away for work, with tenants in the property

In those situations, PRR still helps, but only for part of the gain.

2. Key concept: periods of occupation vs periods of letting

HMRC’s logic is simple (even if the paperwork isn’t):

You get Private Residence Relief for the parts of your ownership period where the property is treated as your only or main home.

That can include:

  • Periods you actually lived there as your main residence
  • Certain periods you were living away but are treated as if you lived there (called “deemed occupation”)
  • The final 9 months of ownership (the “final period exemption”), even if you’ve already moved out

Anything outside that, for example years where the property was not your main home and was fully let, is normally a chargeable period where PRR doesn’t protect the gain.

So the question for a landlord who used to live there is:

“Over my total ownership period, what fraction of the time does HMRC treat this as my main home?”

That fraction is the bit of your gain that can be exempt.

3. The final 9-month rule (and 36-month rule)

The final period exemption is a big one for ex-home landlords.

GOV.UK is clear: when working out PRR, you always get relief for:

  • The years you lived in the home as your main residence
  • The last 9 months you owned the home, even if you were not living there at the time

For qualifying disabled individuals and those moving into long-term residential care, the final period remains 36 months. HS283 confirms these extended rules still apply in 2024/25 and beyond.

So even if you moved out and let the property, that final 9-month slice is normally treated as if you still lived there for PRR purposes.

4. Scenario 1 – You moved out and then let the whole property

This is the classic landlord story:

“I bought the flat, lived there for a few years, then bought somewhere else and kept the flat as a rental.”

GOV.UK uses a simple example:

  • Owned your home for 15 years
  • Lived there for 7.5 years
  • Let it out for 7.5 years
  • You get PRR for:
    • the 7.5 years you lived there, plus
    • the last 9 months you owned it
  • That’s 8.25 years out of 15 = 55% of the time, so PRR covers 55% of your gain.

Let’s apply that to a landlord with real numbers.

Worked example : ex-home now fully let

Facts

  • Bought: 1 July 2010 for £200,000
  • Lived there: 1 July 2010 – 30 June 2016 (6 years)
  • Let it: 1 July 2016 – 30 June 2024 (8 years)
  • Sold: 30 June 2024 for £320,000
  • Costs of buying/selling/improvements: £20,000 (SDLT, legal, agents, extension)
  1. Work out the gain
  • Sale proceeds: £320,000
  • Less allowable costs (purchase + SDLT + legal + agents + improvements): £220,000
  • Gain = £100,000
  1. Work out qualifying PRR period
  • Total ownership: 14 years (1 July 2010 – 30 June 2024)
  • Lived there as main home: 6 years
  • Final period exemption: last 9 months (0.75 years)

So PRR applies for 6.75 of 14 years.

PRR fraction = 6.75 ÷ 14 ≈ 48.2%

  1. Apply PRR to the gain
  • PRR-exempt gain: 48.2% × £100,000 ≈ £48,200
  • Remaining gain (before annual allowance): ≈ £51,800

That £51,800 is then subject to normal CGT rules in your Capital Gains Tax on rental property guide:

  • Less your £3,000 annual CGT allowance (per owner)
  • Remaining taxable gain at 18% / 24% depending on income and band

Crucial post-2020 point:
Because the property was wholly let once you moved out, modern lettings relief does not apply to that let period – only PRR helps here.

5. Lettings relief – what actually changed from 6 April 2020?

This is where a lot of older landlord content is now wrong.

Historically, landlords could get up to £40,000 lettings relief per owner even where the whole property was let after they moved out.

From 6 April 2020, the government changed the rules so that:

  • The final period exemption was reduced from 18 months to 9 months (36 months remains for disabled / care-home cases), and
  • Lettings relief was reformed so that it only applies where the owner is in shared occupancy with a tenant

HMRC’s Capital Gains Manual spells it out:

For disposals on or after 6 April 2020, lettings relief under the new rules does not apply to a period during which the whole dwelling is let.

So for sales in 2025/26 and 2026/27:

  • If you moved out and let the whole property, you generally do not get lettings relief, only PRR for the periods it was your home (plus final 9 months/deemed occupation).
  • Lettings relief is now aimed at people who share their home with a tenant, typically lodgers or similar arrangements.

That brings us neatly to the next scenario.

6. Scenario 2 – You’ve always lived there, but you’ve had lodgers / flatmates

This is increasingly common:

“I’ve always lived here, but I’ve had a lodger for 10 years to help with the mortgage.”

GOV.UK’s “If you let out your home” guidance makes two helpful points:

  • You may have CGT to pay when you sell if you’ve let out part of your home.
  • However, you’re not treated as “letting out your home” (for PRR purposes) just because:
    • You have a lodger who shares your living space, or
    • Your children or parents live with you and contribute to costs

In shared-occupancy cases:

  • The property is still your main home
  • PRR still applies to the whole dwelling, but
  • There may be a small chargeable element if part of it has been used exclusively for letting or business
  • Lettings relief under the post-2020 rules is designed to reduce that chargeable element, up to a maximum of £40,000 per owner, but only where owner and tenant have shared occupation

Worked example: live-in landlord with a lodger

Facts

  • You bought a house in 2010 for £300,000
  • You’ve lived in it as your main home the entire time
  • From 2015 onwards, you’ve rented a spare room to a lodger who shares your kitchen and living room
  • You sell in 2025 for £500,000
  • Costs of buying/selling/improvements: £20,000
  1. Work out the gain
  • Sale proceeds: £500,000
  • Allowable costs (purchase, SDLT, legal, agents, improvements): say £320,000
  • Gain = £180,000
  1. Private Residence Relief

Because you’ve always lived there as your main home and you’ve had a lodger sharing your living space, GOV.UK guidance suggests you can still get full PRR on the whole propert, there may be no CGT at all.

If, however, you had set aside part of the property (for example an annex) exclusively for letting, that part could be outside PRR and lettings relief might come into play.

The key takeaway: sharing your home with a lodger is very different from moving out and fully letting the property.

7. Scenario 3 – You moved away (for work or other reasons) and let the property

Many landlords ask:

“I moved abroad for work for a few years and let the property. Do I lose PRR for that whole period?”

Not necessarily.

GOV.UK’s “Living away from your home” guidance says you always get PRR for certain periods of absence, even if you were not living in the home at the time, provided certain conditions are met.

These “deemed occupation” periods include:

  • Up to 3 years for any reason, if you lived in the property as your main home both before and after the absence
  • Any length of time working elsewhere in the UK if your employer required you to live away
  • Any length of time working overseas, again subject to conditions
  • Periods when you could not live in the property because you were required to live elsewhere in the performance of your duties

During these periods, you can still claim PRR as if you were living there, even if the property was let, although there are detailed conditions and you generally need to move back in afterwards.

So the timeline for a landlord who:

  • Lived in the property
  • Moved away and let it for 2–3 years while working elsewhere
  • Moved back in and then sold

can often be more favourable than someone who simply moves out permanently and never comes back.

HS283 has multiple worked examples of how these absences work in practice.

8. Step-by-step: how to work out PRR when you’ve let the property

Here’s the practical bit you can use in client meetings and on calls.

Step 1 – Map your ownership timeline

List:

  • Date you bought the property
  • Date you sold (or plan to sell)
  • Periods when it was your main home
  • Periods when it was fully let
  • Periods when you had lodgers / partial letting
  • Any absences that might count as deemed occupation (per GOV.UK rules)

Step 2 – Work out your qualifying PRR months

Count all months where:

  • You actually lived there as your main home, plus
  • Any deemed occupation months that qualify, plus
  • The final 9 months (or 36 months, if you fall into the disabled / care-home category).

Step 3 – Calculate the PRR fraction

PRR fraction = qualifying months ÷ total months of ownership

Apply that fraction to the gain (sale proceeds minus allowable costs) to get the PRR-exempt amount.

Step 4 – Deal with lettings relief (if applicable)

  • If the property has been wholly let after you moved out and you’re selling in 2025/26 or 2026/27 → lettings relief will not usually apply.
  • If you shared the property with a tenant (lodger) while it was your main home:
    • You may qualify for lettings relief under the post-2020 rules, up to the lowest of:
      • The amount of PRR itself
      • The gain relating to the let part
      • £40,000 per owner (the old cap still applies, but in much narrower circumstances)

In practice, this is where most landlords benefit from having an accountant walk through the numbers with them – which is where your CGT on rental property article and service offering dovetail nicely with this PRR guide.

Step 5 – Feed what’s left into your CGT calculation

Whatever gain is left after PRR and any lettings relief:

  • Is reduced by your annual CGT allowance (£3,000 per person from 2024/25 onwards)
  • Is taxed at 18% / 24% depending on your other income, as explained in your CGT landlord guide

9. How PRR and letting interact with the 60-day CGT rules

The 60-day rules now catch a lot of landlords out.

If you’re a UK-resident individual and you sell a UK residential property where CGT is due (even after PRR and any lettings relief), you must:

If you miss the 60-day deadline, HMRC can charge interest and penalties.

You then also include the gain on your Self Assessment tax return, but the 60-day payment is a payment on account, not optional.

This is why we’re keen for clients to look at PRR and letting before they accept an offer, not after completion when the 60-day clock is already ticking.

For the full reporting side, point readers back to your Capital Gains Tax on rental property pillar, which walks through the CGT calculation and reporting side in more detail.

10. Common mistakes landlords make with PRR and letting

A few patterns we see over and over:

  • “I lived there once, so the whole gain is exempt, right?”
    Not always. If it hasn’t always been your only or main home, PRR is usually time-apportioned across occupation vs non-occupation.
  • Relying on old lettings relief rules
    Many older articles talk about up to £40,000 lettings relief per owner even where the whole property was let – that’s only relevant to disposals before 6 April 2020. For 2025/26, lettings relief is shared-occupancy only.
  • Ignoring periods of absence that could help
    Some landlords lose PRR because they don’t realise certain absences (working away, etc.) can count as deemed occupation if they meet the conditions.
  • Missing the 60-day report
    Assuming “it was my home at some point” means no CGT, only to discover later that there is a chargeable slice and by then the 60 days have passed.
  • Not looking at the bigger structure
    PRR is one piece of the puzzle. Whether to hold the property personally or in an SPV, or whether to sell the property vs sell shares in a company, is covered in your guides on SPV vs own name and moving property into a limited company and those choices can dwarf the PRR impact over the life of the portfolio.

11. Quick Q&A, Private Residence Relief and letting for landlords

Do I pay Capital Gains Tax if I lived in the property first, then let it?
Possibly. You’ll usually get Private Residence Relief for the period it was your only or main home plus the final 9 months you owned it, but the years it was fully let are normally chargeable. You pay CGT on the part of the gain not covered by PRR (and any lettings relief).

Does renting out my home stop it being my main residence for PRR?
Letting the property does not erase PRR for the period you genuinely lived there as your main residence, but the let period itself may not qualify unless it falls within one of the deemed occupation rules. The final 9 months are usually protected regardless.

What is lettings relief now, and when does it apply?
For disposals on or after 6 April 2020, lettings relief is restricted to situations where the owner is in shared occupancy with the tenant (for example, a landlord with a lodger), it no longer applies where the whole property is let after moving out. It’s capped at the lowest of the PRR amount, the gain relating to the let part, and £40,000 per owner.

How does the final 9-month rule work if I’ve let the property?
You still get PRR for the last 9 months of ownership (36 months in certain disability/care cases), even if you were not living there and the property was let. Those months are treated as if you lived there for PRR purposes.

Do I have to report the sale within 60 days if there’s any CGT to pay?
Yes. If you’re a UK-resident individual selling UK residential property and there is CGT due (after PRR and any lettings relief), you must use HMRC’s Capital Gains Tax on UK property service and report and pay within 60 days of completion.

12. What should you do before you sell?

If you’ve ever lived in a property you now let, the order in which you:

  • moved in,
  • moved out,
  • let it, and
  • plan to sell

can be the difference between no CGT and a five-figure tax bill.

Before you accept an offer, it’s worth:

  1. Mapping your timeline against the PRR rules
  2. Checking whether any deemed occupation periods apply
  3. Seeing whether lettings relief (in the post-2020 shared-occupancy sense) actually helps
  4. Running the final numbers through your CGT on rental property framework
  5. Making sure you won’t miss the 60-day reporting deadline

That’s the kind of work we do with landlords every week.

If you’re thinking about selling in 2025/26 or 2026/27, or you’re not sure how your letting history affects Private Residence Relief, book a 20-minute PRR review call and we’ll map it out properly, with your actual dates and numbers in front of us, not guesswork.

20-minute PRR review call