Mixed-Use Properties & CGT

Key facts

A mixed-use property is one that has both residential and commercial elements (e.g. a shop with a flat above).
The gain must be apportioned between the residential and non-residential parts.
Residential gains are taxed at 18% / 24%; commercial gains are taxed at the same rates from 30 October 2024.
The residential element triggers a 60-day CGT property return; the commercial element does not (for UK residents).
PRR may apply to the residential part if it was the owner’s main home.

What Is a Mixed-Use Property?

A mixed-use property is one that serves both residential and commercial purposes. Common examples include:^[1]

A shop with a flat above
A pub or guest house with owner’s living quarters
A farm with a farmhouse and agricultural buildings
An office building with a residential apartment on one floor
A home with part used exclusively as a business premises

Why the Distinction Matters

From a CGT perspective, the residential and non-residential elements of a mixed-use property may be treated differently:^[3]

Feature	Residential Element	Non-Residential Element
CGT rate (from 30 Oct 2024)	18% / 24%	18% / 24%
60-day reporting (UK residents)	Yes	No (report on Self Assessment)
Private Residence Relief	May apply if used as main home	Not available
BADR / Rollover Relief	Not usually available	May be available for the business element
SDLT rates on purchase	Residential rates + surcharge	Commercial rates (often lower)

Note on rates: Since 30 October 2024, the CGT rates for residential and non-residential disposals are the same (18%/24%). Prior to this date, non-residential gains were taxed at 10%/20%, making the distinction more significant for tax purposes. However, the 60-day reporting requirement and eligibility for reliefs still differ.

How to Apportion the Gain

When a mixed-use property is sold, the total gain must be apportioned between the residential and non-residential parts. Common methods include:^[1]

Floor area: The most commonly accepted method — apportion by square footage or square metres
Relative value: If one part is significantly more valuable per unit area (e.g. a prime retail ground floor vs basic upper-floor flat), value-based apportionment may be more appropriate
Specific identification: If there are separate title deeds or distinctly separable units, each may be treated as a separate asset

Worked Example

Maria sells a property comprising a ground-floor shop (60 sq m) and an upper-floor flat (40 sq m) for £500,000. She bought it for £300,000 with £4,000 in costs. Her total disposal costs are £8,000. She never lived in the flat.

Step	Total	Shop (60%)	Flat (40%)
Proceeds	£500,000	£300,000	£200,000
Less: costs	£312,000	£187,200	£124,800
Gain	£188,000	£112,800	£75,200

The flat element (£75,200 gain) is residential and must be reported via the 60-day CGT property return. The shop element (£112,800 gain) may qualify for business reliefs such as BADR if Maria ran her own business there.

PRR and Mixed-Use Properties

If the residential part of the property was the owner’s main home, Private Residence Relief can apply to the residential portion of the gain. The commercial part will not qualify for PRR.^[1]

If part of the home was used exclusively for business purposes (e.g. a dedicated office room that was never used for domestic purposes), PRR is restricted for that part. However, if a room was used for both business and domestic purposes (e.g. a home office in a spare bedroom), PRR is normally unaffected.

Tip: Avoid having a room used exclusively for business. If you occasionally use a business room for domestic purposes (even if only occasionally storing personal items there), the entire property may qualify for full PRR on the residential element.^[1]

Business Reliefs on the Commercial Part

The non-residential element of a mixed-use property may qualify for business CGT reliefs:

Business Asset Disposal Relief (BADR): 10% rate on qualifying business disposals up to the £1 million lifetime limit
Rollover Relief: Defer the gain if you reinvest in qualifying business assets
Holdover Relief: Available on gifts of business assets

SDLT Implications on Purchase

When buying a mixed-use property, the SDLT treatment differs from a purely residential purchase. Mixed-use properties are taxed under the non-residential SDLT rates, which are often lower than residential rates and are not subject to the higher rates for additional dwellings (currently 5% surcharge from October 2024).

Frequently Asked Questions

What is a mixed-use property for CGT?

A mixed-use property is one that combines residential and non-residential use — for example, a shop with a flat above, or a farmhouse with agricultural land. For CGT purposes, the gain is split between the two elements, and different rules may apply to each part.

How do I apportion the gain?

The gain is typically apportioned by reference to the floor area or value of the residential and non-residential parts. If the property is a single asset (e.g. a building with a shop downstairs and flat upstairs), a reasonable basis of apportionment is needed. HMRC accepts floor area as a common approach.

Do I need to file a 60-day return for a mixed-use property?

UK residents must file a 60-day CGT property return for the residential element of the disposal if CGT is due. The commercial element is reported through Self Assessment in the normal way. Non-UK residents must report all UK property disposals within 60 days.

Can I claim Private Residence Relief on part of a mixed-use property?

Yes. If the residential part was your main home, PRR can apply to that portion of the gain. The commercial part will not qualify for PRR but may qualify for other reliefs such as Business Asset Disposal Relief.

Sources

Capital Gains Manual: CG64680 – PRR: mixed use — HMRC
Tax when you sell property — GOV.UK
Capital Gains Manual: CG73600 – Residential and non-residential property — HMRC