This site uses cookies. By continuing to browse the site you are agreeing to our use of cookies. To find out more about cookies on this website and how to delete cookies, see our privacy notice.

Tools which collect anonymous data to enable us to see how visitors use our site and how it performs. We use this to improve our products, services and user experience.


A bit of data which remembers the affiliate who forwarded a user to our site and recognises orders from those who become customers through that affiliate.


Tools that enable essential services and functionality, including identity verification, service continuity and site security.

Enrol now on the free landlord tax strategies course

To enrol in the 7 tax saving strategies email course complete the form below. The first module will be emailed to you immediately.

Enrol now on the free landlord tax strategies course

Thank You!

Free Tax Saving Strategies Course
The seven FREE property tax busting strategies course reveals the secrets of how to legitimately beat the taxman and boost your property profits!
View All Questions

What is Private Letting Relief?


I have been told that there is a special form of relief against CGT if you sell a property that is let out in which you lived prior to letting.  This is supposed to be in addition to the principal private residence relief.  Is there such a relief and how does it work?


Arthur Says

Yes there is a relief and it is known as the Private Letting Relief


The Inland Revenue states that the private letting relief can be used where


·          you sell a dwelling house which is, or has been, your only or main residence, and


·          part or all of it has at some time in your period of ownership been let as a residential accommodation.


The amount of private letting relief that can be claimed cannot be greater than £40,000, and it must be the lowest of the following three values:


·          £40,000;

·          the amount of private residence relief that has already been claimed;


·          the amount of any chargeable gain that is made due to the letting; that is, this is the amount that is attributed to the increase in the property value during the period it was let.


The use of this relief is best illustrated via the following case study.

Case Study

Roger buys a three-bedroom semi-detached house in North Wales for £50,000 in 1990.


He lives in the house for two years and then decides to move to a bigger four-bedroom detached house. He rents out the three-bedroom house for the next five years.


In 1997 he sells the three-bedroom house for £120,000. This means that he has made a capital gain of £70,000.


5/7ths of the profit is exempt from CGT because he is able to claim partial residence relief (two years PPR and the 36-month rule).


This means that he is only liable to pay CGT on the remaining £20,000 of chargeable gain. However, Roger is also able to claim private letting relief, and the amount he can claim is the lower of the following three values:


·          £40,000;

·          amount of private residence relief already claimed is £50,000;

·          amount of any chargeable gain that is made due to the letting is £20,000 (assuming that property increased by £10,000 in each of the two years that the property was let).


This means that Roger is allowed to claim private letting relief of £20,000 as this is the lower of the three values.


Therefore the outstanding chargeable gain of £20,000 is cancelled out by this relief, which means that he has absolutely no CGT liability.


In other words, Roger has made a tax-free capital gain of £70,000 just by having lived in a property for two years!


Landlord Tax Secrets Get our SEVEN FREE Landlord Tax Saving Strategies - Guaranteed To Slash Your Property Tax Bills!
Click here for more.

Got a burning tax question?

Why not submit a tax question to our tax advisors

Ask a Question