Private residence relief on a former home later let (TCGA 1992, s.223)
On 1 January 2012 Kemi Adebayo bought a flat in Bristol, which she occupied as her only residence until 31 December 2019. She then moved in with her partner in a house her partner owns, and let the flat to tenants. She never lived in the flat again. She sold it on 31 December 2025, making a gain (before any relief) of £140,000. For simplicity, treat each month as equal in length, and assume no relief other than private residence relief applies and that Kemi never shared occupation of the flat with any tenant.
What is Kemi's chargeable gain on the sale, before the annual exempt amount?
Choose one answer to see the reasoning.
Worked answer
Correct answer E: £52,500
THE RULE TO REMEMBER
Private residence relief exempts the fraction of the gain reflecting actual residence plus the final 9 months; absence relief needs residence both before and after the absence.
Private residence relief on a former home later let (TCGA 1992, s.223)
Under s.223(1) and (2) of the Taxation of Chargeable Gains Act 1992, where a dwelling has not been the owner's only or main residence throughout the period of ownership, the exempt fraction of the gain is the period of actual residence plus the last 9 months of ownership in any event, divided by the whole period of ownership. Kemi owned the flat for 14 years (168 months). She lived there for 8 years (96 months), and the final 9 months are also treated as residence, giving 105 months. The exempt part is £140,000 × 105/168 = £87,500, leaving a chargeable gain of £52,500. Her 6 years away do not qualify for the 3-year absence relief in s.223(3)(a), because Condition B in s.223(3B) requires her to have lived in the flat again after the absence, and she never did.
Why A is wrong: Full relief requires residence throughout ownership (apart from the last 9 months); otherwise only a fraction of the gain is exempt.
Why B is wrong: £22,500 wrongly adds 36 months of absence relief, which needs the owner to reoccupy the dwelling after the absence.
Why C is wrong: £45,000 uses the old 18-month final period instead of the current 9 months.
Why D is wrong: £60,000 ignores the final 9 months, which are treated as a period of residence in any event.
A little more practice done.
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