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Legal changes

Private Residence Relief consultation

On 1 April 2019 the Government launched a consultation on changes to Private Residence Relief from Capital Gains Tax

On 1 April 2019 the Government launched a consultation on changes to Private Residence Relief (PRR) from Capital Gains Tax (CGT).

The purpose of PRR is to provide relief from CGT for gains or losses which arise when a person sells or disposes of a dwelling that is (or has been) used as their only or main residence.

The proposed changes will take effect from 6 April 2020 and involve restricting lettings relief to property owners who share occupancy with a tenant. Lettings relief allows people to let out spare rooms in their property on a casual basis without losing the benefit of PPR.  However, HMRC believes it is being used for purposes beyond the original policy intention and so proposes to restrict its availability.  The proposals would effectively abolish lettings relief for buy-to-let purposes.  STEP estimates that the impact on a typical landlord could be to increase the chargeable gain on disposal of a property by up to £40,000 and so landlords should seek specialist advice on the impact of such changes (STEP, "Details of new HMRC restrictions on Private Residence Relief", 1 April 2019).

Currently, where a property is (or has been) occupied as the owner’s only or main residence, the final 18 months of their ownership always qualifies for PRR regardless of the property’s use. There are special rules for disabled property owners, whereby a 36 month exemption applies. The Government’s proposed changes would reduce the final-period exemption from 18 months to 9 months, although it is suggested the 36 month exemption for disabled persons will remain unchanged. 

The Government is also considering changes to the rules concerning CGT on inter-spouse transfers. This could mean the receiving spouse inherits the transferring spouse’s period of ownership and the use to which the property was put during that time. The impact could potentially prevent an individual claiming full PRR on the disposal of a property that their spouse had previously owned and let out.  

The Government estimates the proposed changes will impact around 40,000 individuals per year. The consultation invites comments about the proposed changes and can be found on the Government website. The consultation closes on 1 June 2019.

If you have any questions or would like to know more about our update, please contact Kirsten Wilkins, Solicitor at

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