Bishop & Sewell

The Deputy Leader of the Labour Party Angela Rayner faces intense scrutiny following the sale of her home of almost a decade. The allegation made against Rayner is that she was at the time of the sale living in a different home with her partner and that capital gains tax should have been paid.

The tax affairs of Angela Rayner are rightly confidential and whether or not she broke or bent the rules can be left to speculation in the popular media. But the rules are well-established albeit sometimes complex, writes Olivia Meekin and Michael Romain.

The general rule is that capital gains tax (CGT) is not payable on the sale of your home – what HMRC calls Private Residence Relief (PRR), previously called Principal Private Residence Relief. Most homeowners tend to own just one property and live in it and will never need to worry about CGT on the sale of that home.

Where a second home is owned and sold, CGT will be payable on the gain, or profit, made. This can be reduced by offsetting qualifying expenditure, such as improvements made to the property as well as other costs connected to the acquisition and disposal of the property in question.

HMRC does not give any guidance on how long an individual must live in the property for it to qualify for the relief but pre-supposes a degree of “permanence and continuity”. A few weeks living in the property is unlikely to qualify, meaning that you cannot simply switch homes to avoid any CGT liability.  Even where a second home does eventually qualify for PRR, this will not wipe out any taxable gain made during the period when it was not used a main residence and an apportionment calculation must be conducted.

Marriage can add complications and confusion, with married couples only permitted to claim Private Residence Relief on one property – the property which is or has been your main residence.

It is not uncommon for a couple to each bring their own home to their partnership and here they have a two-year window where they can nominate which of those properties is to be considered their primary residence. On the sale of the home not nominated as the primary residence, PRR will only be available on the final nine months of ownership (the statutory nine-month rule).

Further complications can arise if the property is let out in its entirety or in part. Take, for example, a property used as a main residence for 10 years and then let out for five years. It would be possible to claim Private Residence Relief in relation to the ten years it was used as a private residence and also for the final nine months of ownership. If the property is let out in part, say an interconnected annexe accounting for 10% of the floor space, then Private Residence Relief could only be claimed on the 90% of the gain.

Here too exemptions are available. If a lodger shares all of the living space with you or if you have children or parents living with you who pay rent, then the full Private Residence Relief can be claimed.

The size of the grounds around the property should also be taken into consideration when calculating if PRR can be applied against the whole gain.  It is often forgotten that even where a property has only ever been used as a permanent main residence, PRR only applies to grounds and gardens of up to 0.5 hectares (including the site of the dwelling house).  Land that is used for agricultural or commercial purposes is also excluded from PRR.

The rules on CGT and property are well established and have been tested regularly through the courts. They are, however, complex and it is easy to inadvertently fall foul of the regulations. Taking expert advice will ensure the right amount of tax is paid.


Contact our Private Client Solicitors

If you have questions surrounding ownership of property or are in need of advice or assistance on any of the legal issues mentioned in this article, please contact Olivia Meekin, Partner Mike Romain Solicitor or any member of our experienced Private Client team on 020 7631 4141 or email 

The above is accurate as at 22 April 2024. The information above may be subject to change.

The content of this note should not be considered legal advice and each matter should be considered on a case-by-case basis.

Category: Blog, News | Date: 22nd Apr 2024

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