CGT
Capital Gains TaxMerranti

CGT Strategies for Landlords & Second Homes: Letting Relief, Partial PPR & Planning Tips

When it comes to selling second homes or buy-to-let properties, one of the most pressing concerns for landlords is Capital Gains Tax (CGT). With recent changes to CGT reporting and reliefs, careful planning is more important than ever to avoid unnecessary tax liabilities.

In this post, we break down the key strategies landlords can use to mitigate CGT, including Letting Relief, Partial Private Residence Relief (PPR), and timing-based planning opportunities.

1. What Is Capital Gains Tax (CGT) for Property Owners?

CGT applies when you sell (or gift) a property that’s not your main home and make a profit (gain) above the annual tax-free threshold.

For the 2024/25 tax year:

  • The CGT annual exemption is just £3,000 (down from £6,000 the year before).
  • Gains on residential property are taxed at 18% (basic rate) or 24% (higher/additional rate).

Importantly, these gains must be reported to HMRC within 60 days of sale via the UK Property Reporting Service.

2. Partial Private Residence Relief (PPR)

If the property was at any point your main residence, you may be eligible for Private Residence Relief (PPR).

Even if you later rented the property out, you can still benefit from:

  • Full exemption for periods you lived in the property as your main home.
  • Partial exemption for the last 9 months of ownership (regardless of whether you were living there during that time).

✅ Example:

Emma bought a flat in 2015 and lived in it until 2020 before letting it out. She sold it in 2024.

  • She owned the flat for 9 years.
  • She lived in it for 5 years + 9 final months.
  • That’s approx. 66% of the ownership period qualifying for PPR, reducing her taxable gain significantly.

3. Letting Relief (Post-2020 Rules)

Letting Relief used to be a generous deduction, but since April 2020, it’s much more limited.

Now, Letting Relief is only available if:

  • You let part of your home while living there at the same time (e.g., renting out a room).
  • You do not qualify if you moved out and then rented the entire property.

The relief is worth up to £40,000 (£80,000 for couples jointly owning a property), but only under the strict shared-occupancy rules.

➡️ Tip: If you’re planning to let part of your residence while still living there, keep clear records and consider speaking with us to ensure you meet the criteria for relief.

4. Timing Is Everything: Strategic Disposal Planning

CGT is calculated on the gain made between purchase and sale, but when you sell matters too:

💡 Key Planning Opportunities:

  • Spousal Transfers: Transferring ownership to a spouse before selling allows you to double the use of the £3,000 exemption and potentially reduce the CGT rate (if they’re in a lower tax band).
  • Utilising Losses: Offset other capital losses to reduce the taxable gain.
  • Tax-Year Planning: Delaying a sale until the next tax year may spread gains over two years and use both years’ exemptions.
  • Instalment Sales or Gifting: Consider structured sales or gifting strategies that defer or minimise gains (especially when gifting to children or trusts—though these come with complex rules).

5. Don’t Forget Reporting Deadlines

Since 2020, CGT on UK residential property must be reported within 60 days of completion, and the tax must be paid within the same period.

Late reporting can result in:

  • £100 automatic penalty.
  • Additional fines if more than 6 months late.
  • Interest on unpaid tax.

➡️ Tip: Even if you plan to report the gain in your Self Assessment return, the separate CGT property return must still be filed within the 60-day window.

6. Planning Ahead: How Merranti Can Help

At Merranti Accounting, we work with landlords and property investors to:

  • Calculate your potential CGT exposure before selling.
  • Identify qualifying reliefs (including partial PPR and shared Letting Relief).
  • Optimise the timing of your disposals to maximise allowances.
  • Handle all reporting requirements and keep you compliant.

Final Thought

If you’re considering selling a rental property or second home, don’t wait until after the sale to calculate your CGT. Early planning could save you thousands.

📞 Get in touch with our tax team today to review your portfolio and ensure you’re not overpaying Capital Gains Tax.

Merranti Accounting – Your Partner in Tax-Efficient Property Strategies

This article is for general guidance only and does not constitute legal or financial advice. Always consult with a qualified tax advisor before making decisions regarding your property portfolio.

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