Year End Tax Review 2023/2024 – Blog 9 – Principal Private Residence (PPR) Relief

Principal Private Residence (PPR) relief reduces the gain on the sale of your main home, usually to nil, thus avoiding a charge to Capital Gains tax (CGT).

The relief applies for the time that the property is occupied as your main home, plus the final 9 months of ownership, which is extended to 36 months for disabled people or individuals moving into a care home for more than three months.  This extension also applies for spouses of such people.

Other periods of absence from the property may qualify for PPR relief as deemed occupation (e.g. if going to work full-time abroad).

You need to show that you have occupied the property with the intention of living there as a ‘home’ with a degree of permanence.

If you own more than one property that you actually use as a home (as opposed to always renting out), you may be able to make a PRR election, stating which property is your main home for CGT purposes.

For UK residents, such an election must normally be submitted within two years of an additional property being available for occupation as a residence.

Planning points

• HMRC often challenge the availability of PPR relief on a property, particularly where it is a partial claim for a property that was once lived in for some of the period of ownership. Make sure you have enough evidence to show that you lived there (e.g. utility bills, council tax statements or having notified the DVLA that you lived there).

• Couples should consider jointly owning property for which no PRR election can be made, to benefit from two Annual Exemption Allowances and (possibly) lower rates of CGT when the property is sold.

• If a residential property is not fully covered by PPR relief when sold and a tax liability arises, a CGT property return has to be filed within 60 days and the CGT on the disposal paid by that date. This is a very tight deadline.

To make sure it can be met, it is sensible to make sure that you have a record of all costs you have incurred on the property and all documentation (as discussed above) to back up any PPR relief claim. This will enable the taxable gain to be calculated in time to make the 60-day payment.

Where non-residents dispose of UK land and buildings, a 60-day report is needed even if the disposal generates a loss.

The information in this blog provides only an overview of HMRC guidance and legislation in force at the date of publication and no action should be taken without consulting the detailed HMRC guidance and legislation or seeking professional advice.  Therefore no responsibility for loss occasioned by any person acting or refraining from action as a result of the material contained in this blog can be accepted by the firm.