---
title: "Lettings Relief UK: A Guide to the Post-2020 Rules"
description: "Lettings Relief is a valuable Capital Gains Tax (CGT) relief that can reduce the final tax liability on the sale of a property that has been both an individual's main residence and a source of rental income. However, for disposals…"
url: "https://www.accountingfirms.co.uk/knowledge-bank/lettings-relief-uk/"
updated: "2026-08-11"
category: "Landlord & Property Tax"
---

# Lettings Relief UK: A Guide to the Post-2020 Rules

Lettings Relief is a valuable Capital Gains Tax (CGT) relief that can reduce the final tax liability on the sale of a property that has been both an individual's main residence and a source of rental income.

However, for disposals made on or after 6 April 2020, the government fundamentally reformed the rules. The relief now only applies in very specific circumstances, targeting homeowners who share their property with a tenant. This change, introduced by Finance Act 2020, significantly narrows the [relief's availability](https://www.accountingfirms.co.uk/knowledge-bank/are-there-tax-reliefs-available-for-replacing-domestic-items-in-rental-properties/), moving away from its previous application to "accidental landlords" who let out a former home.

This guide explains the current framework for Lettings Relief under section 223B of the Taxation of Chargeable Gains Act 1992 (TCGA 1992).

## **The Fundamental Condition: Shared Occupancy**

The most significant change to Lettings Relief is the introduction of a mandatory shared occupancy test. For any disposal from 6 April 2020, an individual only qualifies for the relief if they were living in the property at the same time as their tenant.

The legislation in s.223B(2) TCGA 1992 specifies that the qualifying condition is met when:

> (a)part of the dwelling-house is the individual’s only or main residence, and (b)another part of the dwelling-house is being let out by the individual as residential accommodation.

This statutory requirement means that if an owner moves out of their property and lets the entire dwelling to a tenant, they will not qualify for Lettings Relief on a future sale. This closes the door on claims where the owner and tenant do not live in the property concurrently.

## **Calculating Lettings Relief**

When an individual meets the shared occupancy condition, Lettings Relief reduces the portion of the [capital gain](https://www.accountingfirms.co.uk/blog/capital-gains-reporting-service/) that is chargeable. The amount of relief available is the **lowest** of the following three figures:

1. The amount of [Private Residence Relief](https://www.accountingfirms.co.uk/blog/what-counts-as-a-garden-for-private-residence-relief/) (PRR) has already been calculated on the gain.
2. £40,000.
3. The amount of the chargeable gain that arises specifically because of the letting.

This "lowest of three" calculation ensures the relief is capped and proportionate to both the gain attributable to the letting and the period the property qualified as a main residence.

| Calculation Step | Description | Source |
| --- | --- | --- |
| **1. Identify Gain Attributable to Letting** | Calculate the portion of the total gain that is not covered by Private Residence Relief (PRR). | s.223B(3) TCGA 1992. |
| **2. Apply the Three Limits** | Compare the gain attributable to letting against the two other statutory limits: the amount of PRR available and the fixed cap of £40,000. | s.223B(4) TCGA 1992. |
| **3. Determine the Relief Amount** | The amount of Lettings Relief is the lowest figure from Step 2. | CG64710. |
| **4. Calculate Final Chargeable Gain** | Subtract the Lettings Relief from the gain attributable to letting (from Step 1). | CG64735. |

## **Worked Example**

An individual sells a dwelling-house in May 2026, realising a total gain of £100,000. Throughout their entire period of ownership, they occupied 60% of the house as their main residence while letting out the remaining 40% to a lodger with whom they shared the property.

1. **Calculate PRR:** The portion of the gain exempt under PRR is 60% of £100,000 = £60,000.
2. **Identify Gain Attributable to Letting:** The remaining gain subject to tax before Lettings Relief is £100,000 - £60,000 = £40,000.
3. **Apply the 'Lowest of Three' Test:**
   - Amount of PRR: £60,000
   - Statutory Cap: £40,000
   - Gain from letting: £40,000
4. **Determine Relief:** The lowest of these three figures is £40,000.
5. **Final Calculation:**
   - Chargeable gain before relief: £40,000
   - Less Lettings Relief: (£40,000)
   - **Final Chargeable Gain: £0**.

## **Important Considerations**

### **Joint Ownership**

If spouses or [civil partners](https://www.accountingfirms.co.uk/blog/have-my-pension-fund/) jointly own a property, the rules treat them in the same way as other joint owners. Each individual must calculate their share of the gain and apply the Lettings Relief rules separately to their portion. For example, if a property is owned 50/50, each owner has a separate £40,000 cap to consider in their personal calculation.

### **Pre-April 2020 Disposals**

It is crucial to distinguish the current rules from the pre-April 2020 regime. Before this date, Lettings Relief was available even if the *entire* dwelling-house was let out, provided it had at some point been the owner's main residence. This more generous version of the relief no longer applies.

### **Distinction from Rent-a-Room Relief**

Lettings Relief should not be confused with Rent-a-Room relief.

- **Lettings Relief** is a [Capital Gains Tax](https://www.accountingfirms.co.uk/blog/so-you-think-you-know-badr/) relief that applies to the *disposal* of a property.
- **Rent-a-Room Relief** is an [Income Tax](https://www.accountingfirms.co.uk/blog/role-of-accounting-in-crowdfunding-campaigns/) relief that exempts gross rental *income* up to an annual threshold when a furnished room in an individual's main residence is let out.

 

*For further detailed guidance and examples, refer to [HMRC’s Capital Gains Manual](https://www.accountingfirms.co.uk/blog/building-trust/) from CG64700 onwards. Specifically, CG64710 provides a summary of the post-2020 rules, while CG64737 illustrates the now-historic pre-2020 position.*.

## References

1. [Changes to ancillary reliefs in Capital Gains Tax Private Residence Relief at 3](https://www.gov.uk/government/publications/changes-to-ancillary-reliefs-in-capital-gains-tax-private-residence-relief/changes-to-ancillary-reliefs-in-capital-gains-tax-private-residence-relief#:~:text=and%20reforms%20lettings%20relief%20so,after%20that%20date%20The%20legislated&text=and%20reforms%20lettings%20relief%20so,partner%20is%20made&text=that%20it%20only,after%20that%20date%20The%20legislated&text=that%20it%20only,partner%20is%20made)
2. [Changes to ancillary reliefs in Capital Gains Tax Private Residence Relief at 5](https://www.gov.uk/government/publications/changes-to-ancillary-reliefs-in-capital-gains-tax-private-residence-relief/changes-to-ancillary-reliefs-in-capital-gains-tax-private-residence-relief#:~:text=Legislation%20will%20be%20introduced%20in,1%20of%20Budget%202018%20as&text=Legislation%20will%20be%20introduced%20in,out%20in%20Table&text=Finance%20Bill%202019%2D20,1%20of%20Budget%202018%20as&text=Finance%20Bill%202019%2D20,out%20in%20Table)
3. [Changes to ancillary reliefs in Capital Gains Tax Private Residence Relief at 6](https://www.gov.uk/government/publications/changes-to-ancillary-reliefs-in-capital-gains-tax-private-residence-relief/changes-to-ancillary-reliefs-in-capital-gains-tax-private-residence-relief#:~:text=Residence%20Relief,to%20fi%20nd%20their%20own&text=Residence%20Relief,Model%20requiring%20them&text=and%20fi%20nal,to%20fi%20nd%20their%20own&text=and%20fi%20nal,Model%20requiring%20them)
4. [Taxation of Chargeable Gains Act 1992, s 223B](https://www.legislation.gov.uk/ukpga/1992/12/section/223B)