Letting Relief for CGT — Who Qualifies After April 2020?

What Is Letting Relief?

Letting Relief is a Capital Gains Tax relief that can reduce the taxable gain when you sell a property that was, at some point, both your main home and a lettable property. It was introduced to protect owner-occupiers who rented out their home — for example, while working abroad — from a disproportionately large CGT bill on their return.

The Old Rules (Pre-April 2020)

Before 6 April 2020, Letting Relief was available to anyone who had at any point lived in the property as their main home, regardless of whether they were living there at the time of the letting. The maximum relief was the **lowest of**:

• The amount of Private Residence Relief (PRR) due
• £40,000
• The gain arising from the letting period

This made Letting Relief extremely valuable for buy-to-let owners who had formerly lived in the property. A higher-rate taxpayer with a £40,000 letting relief entitlement saved up to £11,200 in CGT (at the then 28% rate).

The New Rules — You Must Have Lived With Your Tenants

From **6 April 2020**, the rules changed fundamentally. Letting Relief is now only available where the owner was in **shared occupation** of the property with the tenant at the time of the letting. In other words, you must have been living in the property at the same time as your tenant was.

This is a dramatically narrower condition. The typical scenario in which it now applies is a live-in landlord who rents out one or more rooms while continuing to occupy the rest of the property as their main home.

If you rented out the entire property — even if you previously lived there — you will receive **no Letting Relief** under the post-2020 rules.

When Does Letting Relief Still Apply in Practice?

The relief remains available in the following scenarios (all subject to the shared occupation requirement):

• You live in your main home and rent one or more rooms to lodgers
• You are a live-in landlord with a separate self-contained flat within the property, but still occupy the main part of the building as your home

In the lodger scenario, Letting Relief can still reduce the chargeable gain attributable to the period when the lodger was in residence. However, because you are simultaneously receiving PRR for that same period (the property is still your main home), there may in practice be little or no gain attributable to the letting period at all.

Maximum Relief Still Applies

Even where shared occupation conditions are met, Letting Relief remains capped at the **lowest of**:

• The PRR due
• £40,000
• The gain arising from the letting

Impact on Former Buy-to-Let Owners Who Previously Lived in the Property

If you bought a property, lived in it, then moved out and let it to tenants while you were absent, you cannot claim Letting Relief under the new rules. The letting period was not a period of shared occupation. Your CGT calculation will rely solely on PRR (for the period you actually lived there, plus the final nine months) and the annual exempt amount.

This change removed significant tax planning opportunities that existed before 2020. If you are in this position, your options for reducing CGT are timing the disposal, using spousal transfer to access two annual exempt amounts, or demonstrating additional qualifying periods of absence under the PRR deemed occupation rules.

Worked Example Under New Rules

You bought a property in 2010. You lived there 2010–2016, then rented it out entirely 2016–2026 and sold it in 2026. You were not living with your tenants during the letting period.

• Ownership: 16 years (192 months)
• PRR qualifying period: 6 years occupation + 9 months final period = 81 months
• Non-qualifying period: 111 months
• PRR fraction: 81/192 = 42.2%
• **No Letting Relief** — not in shared occupation

The remaining 57.8% of the gain is chargeable. On a £200,000 gain, approximately £115,600 would be taxable (before deductions and annual exempt amount).

Plan Ahead

Use our [Capital Gains Tax Calculator](/capital-gains-tax-calculator) to model your gain including PRR, and see whether any Letting Relief applies in your specific circumstances. If you are approaching a disposal and are unsure of your position, speak with a qualified tax adviser before proceeding.