Who is Eligible for Lettings Relief? A 2025 Guide for UK Property Sellers

Lettings relief can still wipe out up to £40,000 of taxable gain (or £80,000 for couples), but the eligibility rules tightened dramatically in April 2020—below we explain who still qualifies, how to calculate the relief and how to file on time.

1. What Is Lettings Relief?

Lettings relief is an extra Capital Gains Tax (CGT) deduction that complements Private Residence Relief. It was designed to recognise homeowners who once lived in their property as a main residence but later let it out. By offsetting up to £40,000 of gain per owner, it reduced or removed the CGT bill on a sale.

Key facts:

• Maximum reduction: £40,000 per individual
• Works in addition to Private Residence Relief (PRR)
• Only applies to UK residential property
• Must be claimed in your CGT return within 60 days of completion

2. Why Did the Rules Change in 2020?

Before 6 April 2020, any period of qualifying letting triggered relief, so many landlords escaped CGT altogether. HMRC felt the measure was overly generous and restricted it in two big ways:

1. You can now claim only if you were in shared occupancy with the tenant (e.g. lodgers under the rent-a-room scheme).
2. The final-period exemption—where the last 18 months of ownership automatically qualified for PRR—was cut to nine months (36 months for disabled owners and those in care).

The result? Most landlords who moved out and then let the whole property no longer qualify. Yet homeowners with a lodger may still benefit.

3. Who Qualifies for Lettings Relief Today?

You must tick all of the following boxes:

• You previously occupied the property as your only or main residence.
• You shared the same home with your tenant during the letting period. Think lodger, not separate flat.
• You have chargeable gain left after PRR. Lettings relief cannot exceed this remainder.
• You sell the property on or after 6 April 2020 and submit a UK Property Return within 60 days.

In practical terms, the relief mainly helps:

• Homeowners who took in lodgers to help with mortgage costs.
• Couples who converted spare rooms into short-term rental space (e.g. Airbnb) while still living there.

If you moved out and granted a standard tenancy for the whole property, you no longer qualify, regardless of when the letting began.

4. How Much Lettings Relief Can You Claim?

HMRC sets three separate limits. You receive the lowest of:

1. £40,000 per owner (£80,000 for a jointly-owned property).
2. The amount of Private Residence Relief claimed.
3. The remaining chargeable gain after PRR.

Because PRR typically covers most gains, lettings relief often maxes out at the lower of limit 2 or 3.

4.1 The Formula

Lettings Relief = min( £40,000, amount of PRR, residual gain )

It cannot create a loss; the lowest possible taxable gain is £0.

5. Step-by-Step Calculation Example

Let’s run the numbers for Clare, who bought a flat in London in April 2014 for £300,000, lived in it until April 2019, and then took in a lodger while she still occupied the flat. She sold in April 2024 for £520,000.

1. Total ownership: 120 months (10 years).
2. Main residence period: 60 months living + 9 months final exemption = 69 months.
3. Chargeable period: 51 months (120 – 69).
4. Gain: £520,000 – £300,000 = £220,000.
5. PRR: £220,000 × 69/120 = £126,500.
6. Residual gain: £220,000 – £126,500 = £93,500.
7. Lettings relief: Lowest of £40,000, £126,500 and £93,500 = £40,000.
8. Taxable gain: £93,500 – £40,000 = £53,500.
9. Annual CGT allowance 2024/25: £3,000.
10. Gain liable to CGT: £50,500.

Assuming Clare is a 40% taxpayer, the applicable residential rate is 24% (18% for basic-rate band). Her CGT bill would be:

£50,500 × 24% = £12,120

Without lettings relief, the bill would rise to £21,480. That’s a saving of £9,360.

6. Private Residence and Lettings Relief: How They Interact

Many sellers ask whether they can claim both private residence and lettings relief. The answer is yes—PRR is applied first to cover the period you lived in the property, plus the last nine months of ownership. Lettings relief then tackles any residual gain, up to the limits above.

In other words, lettings relief cannot exist without PRR. If PRR already covers the full gain, lettings relief wears a cloak of invisibility and does nothing.

7. Common Pitfalls and How to Avoid Them

1. Assuming old rules still apply. If you moved out in 2016 and let the entire house, don’t rely on lettings relief.
2. Missing the 60-day deadline. CGT payments and the UK Property Return are both due within 60 days of completion.
3. Overlooking enhancement costs. Capital improvements (loft conversion, extension, new kitchen) can reduce the gain before any reliefs.
4. Mixing up lodger vs. tenant. A lodger shares your facilities. A separate tenancy agreement for the whole property disqualifies you.
5. Claiming after the fact. HMRC will reject late claims; relief must be included in your initial return.

8. Filing Your CGT Return Fast with SwiftCGT

Time is rarely on your side once a sale completes. Penalties start at £100 and rise quickly if you miss the 60-day window. SwiftCGT keeps you compliant without the admin headache.

• Online, fixed-fee Capital Gains Tax filing service for UK residential property.
• £299 for a sole owner, £449 for joint owners (50% discount on the second return).
• HMRC-registered chartered accountants prepare and submit returns within three working days.
• Full review of allowable costs, private residence and lettings relief and any other deductions.
• Digital signature and payment links so you stay within the 60-day limit even when life gets busy.

Book, upload your documents, approve—done.

9. Quick Checklist Before You Sell or Gift a Property

• Confirm main residence periods—keep utility bills, voter registration and bank statements.
• Gather purchase and sale contracts plus completion statements.
• List capital improvements with invoices.
• Note dates when a lodger moved in and out.
• Set a calendar reminder for the 60-day CGT return deadline.
• Get a quote from SwiftCGT if you prefer experts to handle the numbers.

10. Conclusion: Lettings Relief Is Not Dead—But It’s Niche

Post-2020 cgt lettings relief exists only for those who let part of their home while living there. If that’s you, the £40,000 deduction (per owner) can still deliver a four-figure tax saving. Use the checklist and example above to decide whether you qualify, run the calculation, and file on time.

And if spreadsheets, HMRC forms and looming deadlines aren’t your idea of fun, SwiftCGT is ready to crunch the numbers so you don’t have to.

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