Key facts
- Since 6 April 2020, lettings relief only applies where you shared occupation with the tenant.
- The maximum lettings relief is the lowest of: £40,000, the PRR amount, or the gain from the let period.
- Before April 2020, lettings relief was available for any period a former home was let — the rules have been significantly restricted.
- Lettings relief applies in addition to Private Residence Relief and the final period exemption.
What Is Lettings Relief?
Lettings relief is an additional CGT exemption that applies when a property qualifying for Private Residence Relief was also let out as residential accommodation during the ownership period. It can exempt up to £40,000 of additional gain from CGT.[1]
The relief works on top of Private Residence Relief and the final period exemption, providing a further reduction in the chargeable gain.
The Post-April 2020 Rules
From 6 April 2020, lettings relief is only available where the owner shared occupation with the tenant. This means you must have lived in the property at the same time as the tenant, not simply before or after the letting.[3]
In practice, the relief now only applies to:
- Lodgers: letting out a room in your home while you continue to live there
- Shared houses: living in the property and letting other rooms to tenants
The change in practice: Before April 2020, lettings relief was widely used by anyone who had lived in a property and then rented it out entirely before selling. The restriction to shared occupation has effectively eliminated the relief for most buy-to-let conversions and former homes that were fully let out.
How Much Is the Relief?
The amount of lettings relief is the lowest of:[2]
- £40,000
- The amount of Private Residence Relief (including the final period exemption)
- The chargeable gain attributable to the let period
Each individual owner can claim up to £40,000. Joint owners can each claim their own lettings relief, potentially giving a combined maximum of £80,000 for a couple.
Worked Example: Shared Occupation
Sarah has owned her house for 10 years (120 months). She lived in it throughout and let out a spare room to a lodger for 6 of those years. She makes a total gain of £80,000 on sale.
| Step | Amount |
|---|---|
| Total gain | £80,000 |
| Private Residence Relief (entire period — main home throughout) | £80,000 |
| Chargeable gain after PRR | £0 |
In this case, PRR covers the entire gain because Sarah lived in the property throughout. Lettings relief is not needed. Lettings relief only becomes relevant when PRR does not cover the full gain — for example, if part of the property was used exclusively by the lodger and PRR was restricted.
Worked Example: Lodger in Part of Home
Suppose Mark’s property had part used exclusively as a separate flat (not shared living space). The gain is £100,000. PRR covers 70% of the gain (the part he occupied). The remaining 30% (£30,000) relates to the let flat. Mark shared occupation with the tenant (they had access to shared areas).
| Step | Amount |
|---|---|
| Total gain | £100,000 |
| PRR (70%) | £70,000 |
| Gain from let period | £30,000 |
| Lettings relief: lowest of £40,000, £70,000, or £30,000 | £30,000 |
| Chargeable gain | £0 |
The Pre-April 2020 Rules (Historical)
For reference, before 6 April 2020 lettings relief applied whenever:
- The property qualified for PRR at some point during ownership
- The property (or part of it) was let as residential accommodation
- There was no requirement for shared occupation
This made lettings relief available to anyone who lived in a property and then moved out and let it, which was a very common tax planning strategy. The April 2020 changes largely eliminated this benefit.
Transition: The new rules apply based on the disposal date, not the letting period. If you sold on or after 6 April 2020, the new shared-occupation requirement applies to the entire ownership period, even if some letting occurred before April 2020.[3]
Frequently Asked Questions
What is lettings relief?
Lettings relief is an additional CGT relief available when you sell a property that qualifies for Private Residence Relief and was also let out as residential accommodation. Since April 2020, it only applies if you shared occupation with the tenant — for example, letting out a room in a house where you also lived.
Has lettings relief changed?
Yes, significantly. Before 6 April 2020, lettings relief was available whenever a former main home was let out, even if you had moved out entirely. From 6 April 2020, it only applies where you shared occupation with the tenant during the let period.
How much is lettings relief worth?
The maximum lettings relief is the lowest of: £40,000, the amount of Private Residence Relief, or the chargeable gain attributable to the let period. In practice, it can exempt up to £40,000 of additional gain from CGT.
Does lettings relief apply if I moved out and rented the whole property?
Not for disposals after 6 April 2020. The new rules require you to have shared occupation with the tenant for the let period. However, you may still benefit from the final 9 months exemption and Private Residence Relief for the period you lived there.
Further Reading
- Private Residence Relief (PRR) — the main relief for your home
- CGT When You Sell a Rental Property — the full picture for rental property disposals
- Selling a Second Home — CGT on holiday homes and second properties
- The 60-Day CGT Property Report — how to report a property disposal
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