Private Residence Relief (PRR) – Why is it so important?

If you own more than one home

Mostly, you are entitled for relief on for one home for any given period. It is suggested that you maintain records of your each property you lived in as your main home. In case of married couples or civil partnership, only one home per couple as main home for any period is entitled for relief.

If you have mentioned a property as your home, you won’t get relief from another property while your home is nominated, besides for the duration that all the time qualified for relief.

There are several other rules that can implicate your tax relief when you sell your home. Contact Capital Gain Tax helpline if you have any doubts about the rules and their purpose.

You are entitled for full relief for:

• The number of years or duration you lived in the home/property.
• The last 18 months before your sold the house - even if you were not staying there during that time.

However, if you are disabled and own only one home, or in home care for a long time or sold the home/property before 6 April 2014, you are qualified for full relief for the last 36 months while you owned your home that before you sold it. If you find this all process confusing then it is advisable you hire an advisor who can assist you in making the evaluations.

Claim letting relief

You will be qualified for the lowest of the below mentioned:

• the amount that you were given in private residence relief (PRR).
• £40,000.
• the same amount as the taxable gain, you earned from letting your property/home.

Relief from letting your property/home does not include any amount of the taxable gain you earn while your home is vacant.

Capital Gains Tax may be affected by other rules that may make you liable to pay. Contact Capital Gains Tax helpline, if you have any doubts about the CGT and its paying methods.

Letting out part of your home

When you let out part of your home/property, you will need to evaluate the proportion you lived in. Then you will be qualified only for private residence relief (PRR) on the part of your gain.

You may be qualified for Lettings Relief too.

Lettings relief – tips and traps

The property or home where you have lived in as your only or main residence at some point of time and which has been let out as residential accommodation can qualify you for Letting Relief, which becomes a valuable relief for its reduced Capital Gains Tax (CGT) that is to be paid on the sale of the home/property.

You must be familiar with the way Private Residence Relief or PRR concept work. This makes sure that no Capital Gains Tax is to be paid on any profit from the property, which is believed to be the taxpayer’s one and only or main residence all through the period of ownership.

Although, if the home/property happens to be the only and main residence of the taxpayer for some of the part of the ownership, or if there has been some other use of the property other than taxpayer’s main residence the amount qualified for Private Residence Relief is reduced that is the part of the profit from the property become taxable to CGT.

However, the last 18 months of ownership are included as a period when the property/home was the one and only or main residence of the taxpayer, while evaluating the amount of PRR for the taxpayer.

A person may choose to rent out a home/property in many situations, which was one his/her/their only or main residence for living.

For example, many a times people decide to let out their property/home while they are away travelling. On the other hand, couple may decide to live/move in together keep one of the properties/home as a buy-to-let investment. In such circumstances, lettings relief could be obtainable on sale of the property in due course.

Tip for maximum relief

To avail maximum relief from the property/home, living in it as an only and main residence for a short period can benefit as it also creates likelihood of claiming letting relief as well as it ensures exemption of the final 18 months of ownership from Capital Gains Taxes.

When used for both purposes

Lettings relief is obtainable when the taxpayer used a part of the property as the only or main residence and part of the same property is let out for use as a residence. The profit from the gain is shared out by mentioning the share of the property used for individual purpose. You can always contact a Capital Gains Tax helpline to understand the calculations in a better way.

Practical advice

You are entitled for lettings relief when all or part of your home/property is let out for residential purposes while another part of the property is used as only and main residence of the taxpayer during a certain period of the ownership. As a result, to make the home or property as the only and main residence for living for the taxpayer for some point of time to bring the gain within the purview of letting relief can be beneficial from a CGT’s point of view.