Selling a Property You Have Never Lived In — CGT With No PRR

No PRR — The Starting Point

Private Residence Relief (PRR) is the most powerful CGT shelter available on residential property, exempting the entire gain for qualifying main residences. If you have never lived in a property as your main home, PRR simply does not apply — not even partially.

This is the situation for most buy-to-let investors, those who have inherited and immediately let a property, developers who have built or converted a property without ever occupying it, and anyone who holds land or property purely as an investment.

What This Means for Your CGT Bill

Without PRR, the entire gain is potentially chargeable. The gain is the difference between your disposal proceeds and your base cost (purchase price plus acquisition costs), less allowable disposal costs and capital improvement expenditure.

**Example:**

• Purchase price in 2015: £150,000 (including £2,500 in costs)
• Capital improvements (extension): £25,000
• Sale price in 2026: £340,000
• Disposal costs (agent + legal): £7,000

**Gain = £340,000 − £150,000 − £25,000 − £7,000 = £158,000**

Less annual exempt amount: £158,000 − £3,000 = **£155,000 chargeable**

For a higher rate taxpayer: £155,000 × 24% = **£37,200 CGT**

That is a very significant charge, and it must be reported and paid within 60 days of completion.

CGT Rates for 2026/27

Since October 2024:

• **18%** — gains falling within your basic rate Income Tax band
• **24%** — gains exceeding the basic rate band (higher and additional rate taxpayers)

If you have little other income in the disposal year, a larger portion of the gain may fall within the basic rate band, reducing the average effective rate.

Deductions You Can Claim

Meticulous record-keeping pays dividends. Allowable deductions include:

• **Acquisition costs**: Stamp Duty Land Tax, legal fees, surveyor fees, broker fees (if any) paid at purchase
• **Capital expenditure**: Structural improvements — extensions, loft conversions, new central heating systems when first installed. Note: replacing a boiler like-for-like is typically repairs (deductible against rental income) not capital expenditure
• **Disposal costs**: Estate agent fees, legal fees, EPC cost if required by buyer, auctioneer fees
• **Enhancement expenditure**: Landscaping or access works that add value, planning application fees for approved works

What you **cannot** deduct: mortgage interest, letting agent management fees, repairs and maintenance, ground rent, service charges, insurance. These are revenue expenditure and may have been deducted against rental income instead.

Can You Establish PRR Now?

HMRC is well aware that some taxpayers consider moving into a property shortly before sale purely to establish PRR. HMRC will challenge arrangements it considers to be artificial. In genuine cases — for example, you decide to move into the property as a real main home for a period before selling — PRR may apply for the qualifying period of occupation plus the final nine months. But any such arrangement must reflect a genuine change in your living arrangements, not a contrived step taken purely for tax purposes.

Spousal Transfer to Use Two Annual Exempt Amounts

If the property is held in your sole name, transferring a beneficial share to your spouse or civil partner before exchange of contracts allows both individuals to use their annual exempt amount (£3,000 each, £6,000 combined) and potentially their own CGT rate. This must be a genuine transfer of beneficial ownership — not merely a nominal arrangement — and should be done before exchange of contracts.

See our dedicated guide on [transferring property to a spouse to reduce CGT](/transferring-property-spouse-reduce-cgt) for the mechanics.

Timing: Deferring to the Next Tax Year

CGT arises at the date of **exchange** of contracts, not completion. If you exchange contracts on or after 6 April, the disposal falls into the new tax year, giving you a fresh annual exempt amount and potentially a different income picture that affects which CGT rate band applies.

Plan Ahead With Our Calculator

Use our [Capital Gains Tax Calculator](/capital-gains-tax-calculator) to estimate your liability on a buy-to-let or investment property sale. You can model the effect of different deductions, timing scenarios, and spousal splits to minimise your bill within the law.