What is Principal Private Residence Relief?

Paying capital gains tax (CGT) on the sale of a property asset can be a necessary but expensive liability. The good news is that Principal Private Residence Relief (PPR) is available and may help you reduce (or in some cases eliminate) that CGT cost.


Let’s take a look at the rules around PPR and how you qualify to make use of this relief.


How does Principal Private Residence Relief (PPR) work?


Principal Private Residence Relief ensures that any capital gain arising on a property that is your main or only residence is free of capital gains tax.


If you acquire a second property, you have two years from the time of acquisition to nominate which property should be treated as your principal private residence (main residence).


However, if you’re the owner and are absent from the property, gains related to that period (on a pro-rata basis) may be chargeable to CGT.


What are the main PPR rules?


Buying a property is a significant life event, where couples may well buy a property together, in both their names. If you’ve bought a house as a couple, it’s important to note the PPR rules.


  • A married couple or civil partners can only have one main residence between them. This rule only changes if you’re separated (either under a Deed of Separation or otherwise in circumstances where the separation is likely to be permanent).
  • If upon marriage or partnership registration the couple own different properties, and continue to use both, you have two years to nominate which property is to be treated as your main residence.
  • Provided that the property being sold was your main residence at some point, the final nine months of ownership is treated as a period of deemed occupation, regardless of any other factors.
  • Some other periods of absence (see below) may also be treated as periods of occupation when calculating PPR relief, subject to two conditions: Firstly, the property must have been the only or main residence at some time before the period of absence. Secondly, it must have been the only or main residence at some time after the period of absence, unless you were prevented from occupying it because of the situation of your place of work or due to a condition imposed on you by the terms of your employment. This second period requires actual occupation, not deemed occupation, as in, for example, the final nine months of ownership.
  • These other periods of absence include: Any period for any reason not exceeding three years in total. Any period without limit where you were employed or an office holder and where all the duties were carried out outside of the United Kingdom. Any periods of absence up to four years in total where you could not live in the property because of the location of your place of work, or because of any reasonable requirement of your employer that they must live elsewhere. Any or all of these conditions can apply, and in the case of periods where more than one condition applies, the time can be allocated against whichever is most beneficial. The period of deemed occupation can be claimed where the condition applies to the spouse or civil partner in the same way as if it applied to the individual, and is not affected by the actual use of the property – e.g. it can still apply even if the property was rented out.

Talk to us about PPR if you intend to sell your property


For many taxpayers, PPR relief is the main CGT relief that will affect them.


Where the property being sold has not been continuously occupied as the main residence throughout the period of ownership, application of the rules around deemed occupation can have a significant impact on the amount of CGT you end up paying.


It may be that your property situation is extremely straightforward – for example, you only own one property at any time, in which you live throughout your period of ownership. But for any other more complex property arrangements, it makes good sense to check with your accountant about any potential capital gains issues – and how they can be minimised.


Get in touch to talk through your property plans.

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