What is lettings relief for capital gains tax?
Answered 11 March 2026
I now have sufficient information to provide a comprehensive answer. Here is a full explanation of lettings relief for CGT purposes.
Lettings Relief for Capital Gains Tax
What the law says
Lettings relief is a statutory relief found in s.223B TCGA 1992 (for disposals on or after 6 April 2020). It provides additional relief from CGT on the disposal of a dwelling-house where part of that dwelling-house has been let as residential accommodation while another part remained the owner's only or main residence.
Conditions for relief (s.223B TCGA 1992):
The relief applies where:
- A gain to which s.222 TCGA 1992 (private residence relief) applies accrues to an individual on the disposal of, or an interest in, a dwelling-house; and
- At any time during the individual's period of ownership, part of the dwelling-house was the individual's only or main residence, and another part was being let out as residential accommodation.
Amount of relief:
The relief is the lowest of:
- (a) the amount of the gain that is not a chargeable gain by virtue of s.223 TCGA 1992 (i.e. the private residence relief amount); and
- (b) £40,000.
Important restriction: For disposals on or after 6 April 2020, lettings relief under s.223B is not available for any period during which the whole dwelling-house was let out — only where part was let while the owner simultaneously occupied another part as their main residence.
Pre-6 April 2020 disposals: An earlier form of lettings relief under s.223(4) TCGA 1992 applied. The key practical difference was that this earlier form could apply to periods during which the whole dwelling-house was let out.
HMRC guidance / practice
What lettings relief is: Lettings relief is an additional CGT relief available on top of private residence relief (PRR). It applies where PRR is restricted because part of the dwelling-house has been let as residential accommodation.
The three-part cap in practice: HMRC confirms the relief is the lowest of:
- The amount of PRR given under s.223(1)–(3) TCGA 1992;
- £40,000; or
- The amount of the chargeable gain arising by reason of the letting.
Gain "by reason of the letting": The relief is limited to the gain arising specifically from the letting. In a simple case where part of the property was only ever used as the owner's residence and the rest was let, HMRC will accept that the gain remaining after PRR is the gain from the letting. However, if the remaining gain also includes a portion from, say, business use, lettings relief can only cover the letting-related portion.
Shared occupancy (lodgers): Where a lodger lives with the owner as a member of the family, sharing living accommodation and taking meals with them, PRR is not restricted at all — so lettings relief is not needed. Lettings relief becomes relevant where a part of the property is let as a flat or set of rooms (without structural alteration), in which case PRR is restricted for the let part and lettings relief may then apply.
Joint owners (spouses/civil partners): Lettings relief is computed separately on each individual's gain.
Trustees and dependent relatives: Lettings relief applies with appropriate adaptations to gains accruing to trustees where a life tenant or beneficiary has occupied the dwelling-house, and also where the property qualifies for PRR as the residence of a dependent relative.
Practical illustration (from tribunal): In Rooke, the tribunal confirmed that lettings relief was limited to £33,349 — the same as the PRR amount — because that was the lowest of the three statutory figures (PRR, the gain attributable to letting, and £40,000).
Summary table:
| Feature | Detail |
|---|---|
| Statutory basis | s.223B TCGA 1992 (disposals on/after 6 April 2020) |
| Prerequisite | Must qualify for PRR under s.222 TCGA 1992 |
| Key condition | Part let AND part occupied as main residence simultaneously |
| Cap | Lowest of: PRR amount, £40,000, or gain from letting |
| Whole-house letting | Not eligible under s.223B (was eligible under old s.223(4)) |
Citation sources
If spouses or civil partners are joint owners of a dwelling-house they are to be treated in exactly the same way as any other individuals who are joint owners. Lettings relief under s223B TCGA92 (or s223(4) TCGA92 where the disposal was before 6 April 2020) is to be computed separately on their individual gains. See the example at CG64738. Where you are considering the ownership position at the date of separation or divorce or dissolution of the civil partnership you should follow the guidance a
For disposals on or after 6 April 2020, where relief is restricted because part of the dwelling-house has been let as residential accommodation, a further relief (known as lettings relief) may be available under s223B TCGA92. This further relief is not available for any period during which the whole dwelling-house was let out. It is therefore important to identify the entity which makes up the dwelling-house for the purpose of s222(1)(a) TCGA92 in order to decide if lettings relief is due under
Relief is limited by s222(1)(a) TCGA92 to that part of a dwelling-house which has been used as its owner’s only or main residence. So relief is not normally available for a part of the dwelling-house which is let. But there are two exceptions to this rule: where a lodger lives with the owner, see CG64702; where rooms are occupied by the children or parents of the owner even where they have the exclusive use of a bedroom and / or board is paid Relief should not be restricted in these two circumst
The gain relieved by lettings relief under s223B TCGA92 (or s223(4) TCGA92 where the disposal was before 6 April 2020) is limited to only the gain arising by reason of the letting. In a simple case in which a part of a dwelling-house has only been used either as the owner’s only or main residence, and the rest has been let as residential accommodation, it may be accepted that the gain remaining after private residence relief is the gain arising by reason of the letting. That gain may be relieved
rs Rooke’s calculation that her total period of ownership was 188 months and we had no evidence that this was incorrect. 106. The private residence relief available is therefore 21/188 of the chargeable gain, which is £33,349. This is the amount set out in Officer McMenemy’s witness statement. In HMRC’s calculations in their Statement of Case, this appears as £33,349.11. It is not clear how HMRC have arrived at the additional 11p (possibly there has been a rounding error somewhere); we find that
Part VII Other property, businesses, investments etc. Private residences Additional relief: part of private residence let out 223B 1 Where— a a gain to which section 222 applies accrues to an individual on the disposal of, or of an interest in, a dwelling-house or part of a dwelling-house, and b at any time in the individual’s period of ownership the condition in subsection (2) is met in respect of the dwelling-house, the part of the gain that is within subsection (3) is a chargeable gain only t
Statement of Practice (SP14/80) clarifies the position where the owner of a dwelling-house lets part of it as residential accommodation. The statement of practice says that where the owner of a dwelling-house lets a room to a lodger and that lodger lives as a member of the owner’s family, sharing their living accommodation and taking meals with them, no part of the dwelling-house should be treated as having ceased to be occupied as the owner’s residence and therefore private residence relief sho