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# Private Residence Relief and Lettings Relief - CGT

9 replies
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stphnstevey
Forumite
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3.2K posts

I would appreciate a sanity check on calculations below

I am also struggling with applying PRR and LR as a married couple and in what order to do the calculation. In particular, LR seems to be per individual and PRR per property, so does that mean that LR is effectively applied twice and PRR once to the combined gain?

Calculation is as follows. I split the gain after applying PRR, to then apply LR to each persons gain, this is the bit I am not sure is correct?

OWNED 4762 days

LIVED 334 days

LET 4293 days

Empty until sold 134 days

GAIN £ 35,000

COSTS

BUYING

Stamp Duty £ 1,600

Solicitors £ 685

Survey £ 290

SELLING

Solicitors £ 480

Estate Agent £ 2,106

TOTAL COSTS £ 5,161

NET GAIN £35000-£5161=£ 29,839

RELIEFS

PRIVATE RESIDENCE RELIEF

((334+18m)/4762) x £35000 = £ 6,423.77

Remaining Gain £29,839-£6,423.77=£ 24,362.16

Individual Gain £24,362.16 / 2 =£ 11,707.43

LETTING RELIEF

(4293/4762) x £35,000 =£ 31,552.97

Lowest of the 3 limits (PRR, LR, £40k) is PRR = £ 6,423.77

Remaining Gain £11,707.43-£6,423,77 = £ 5,283.66

I am also struggling with applying PRR and LR as a married couple and in what order to do the calculation. In particular, LR seems to be per individual and PRR per property, so does that mean that LR is effectively applied twice and PRR once to the combined gain?

Calculation is as follows. I split the gain after applying PRR, to then apply LR to each persons gain, this is the bit I am not sure is correct?

OWNED 4762 days

LIVED 334 days

LET 4293 days

Empty until sold 134 days

GAIN £ 35,000

COSTS

BUYING

Stamp Duty £ 1,600

Solicitors £ 685

Survey £ 290

SELLING

Solicitors £ 480

Estate Agent £ 2,106

TOTAL COSTS £ 5,161

NET GAIN £35000-£5161=£ 29,839

RELIEFS

PRIVATE RESIDENCE RELIEF

((334+18m)/4762) x £35000 = £ 6,423.77

Remaining Gain £29,839-£6,423.77=£ 24,362.16

Individual Gain £24,362.16 / 2 =£ 11,707.43

LETTING RELIEF

(4293/4762) x £35,000 =£ 31,552.97

Lowest of the 3 limits (PRR, LR, £40k) is PRR = £ 6,423.77

Remaining Gain £11,707.43-£6,423,77 = £ 5,283.66

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## Replies

Thank you, I had seen the other thread and hoped you might reply as you seem knowledgeable in this area

May I ask, if calculation worked out individually, do you split the gain at the start of the calculation?

Also do you apply PRR based on the split gain?

I had seen some example calculation where 18m was deducted from LR, but others where it wasn't, do you have reference to where it clearly states it should be?

If 18m is deductible, is this from the empty period as well?

Sorry, I have looked for examples to follow, but haven't found many for couples, hence my questioning order of calculation

Thanks

read this

https://www.gov.uk/hmrc-internal-manuals/capital-gains-manual/cg64738

example 4 is the one you want to understand the restriction on the LR period

https://www.gov.uk/hmrc-internal-manuals/capital-gains-manual/cg64737

You get two lots of letting relief and ppr. However if you weren’t married or the property wasn’t in joint names, then there are different rules. Also there are two lots of capital gains exemption. The gain after the exception is taxable either at 18% or 28%

Also, when calculating the gain, deduct the cost of selling from proceeds and add the costs of costs incurred on purchase onto the purchase price.

18m is the last 18m of ownership.

As for your calc, I think it’s wrong as you’ve deducted the 100% of LR against the gain, if property is joint then you are only entitled to 50% of the LR. I make the gain to be £8.5K per person though I’ve not checked it out. Just doesn’t look right

Thank you for this!

I presume if there is a vacant period at the end of the ownership, then you subtract this from the 18m in determining the amount of months to subtract from the LR? (Example 2 on the above link seems to suggest this as it has a 4yr vacant period at the end of the letting and doesn't seem to subtract any of the 18m from the LR)

start with a sense check

- how big is the gain? 35k

- how many owners = 2

- what is the share per person? unconfirmed, let's guess 50/50 so 17.5 per person

- how much is the AEA? = 11,700 (18/19) or 12,000(19/20)

- is there a claim to PPR? yes

- is there a claim to LR? yes

- is there an empty period at the end (outside of valid letting voids) >18 months? No

- is there an unoccupied period before final 18 months (excluding valid letting voids), ie a period of ownership when it was a "second" home? No

and yet you still think the net taxable gain will >0?

lived first 5

let next 4

vacant last 1

so the 18 months at the end spans the entire vacant period and 6 months of the LR

PRR (5+1.5) = 6.5

LR (10 - 6.5) = 3.5

sense check 6.5 + 3.5 = 10 and LR period < 4

owned 10 years

let first 5

lived in next 4

vacant last 1

so last 18 spans empty and lived in so you cannot add the full 18 as 6 months of it spans a PRR period anyway

PRR is 5

LR is 5

sense check 5+5=10

owned 11 years

lived first 5

let next 4

vacant last 2

PRR 5+1.5 =6.5

LR = 4

unrelieved period 0.5 (being last 2 - 18 months)

gain 17.5

PRR 10,341

LR 6,364

gross taxable gain 17,500 - 10,341 - 6,364 = 795

deduct AEA .... net taxable gain £0

Ok, so based on the advice given, amended calculation below. How does this sound?

OWNED 4762 days

LIVED 334 days

LET 4293 days

Empty until sold 134 days

GAIN £ 35,000

COSTS

BUYING

Stamp Duty £ 1,600

Solicitors £ 685

Survey £ 290

SELLING

Solicitors £ 480

Estate Agent £ 2,106

TOTAL COSTS £ 5,161

NET GAIN £35000-£5161 =£ 29,839

INDIVIDUAL GAIN =£ 14,919

RELIEFS

PRIVATE RESIDENCE RELIEF

((334+(18x30))/4762) x £14919 = £ 2,738.24

Remaining Gain £14,919-£2,738.24 =£12,181.08

LETTING RELIEF

(4293-((18x30)-134)/4762) x £14,919 = £ 12,177.95

Lowest of the 3 limits (PRR, LR, £40k) is PRR = £ 2,738.24

Remaining Gain £12,181.08 -£2,738.24 =

£ 9,442.84bear in mind 365 x 18/12 = 547 is perfectly acceptable as legislation refers to months, not how to convert to days

https://www.legislation.gov.uk/ukpga/1992/12/section/223

Since 547 is > 134 (empty), the entire empty period falls within the deemed occupation 18 months so it can be ignored. All you need do is:

PRR : 334 + 547 = 881

LR: 4761 - 881 = 3,880

sense check: the entire ownership period is covered by either PRR or LR, so 881 + 3880 = 4761 is fully accounting for the entire ownership, including the empty

Also you seem to have allowed for the date calculator to +1 to give actual count of whole days, but you failed to adjust for that in the individual totals: 334 + 4,293 + 134 = 4,761, not 4,762. Something needs to change by 1, or your calculation should be:

PRR14,919 x 881/4761 =£2,761LR:£2,761(lowest) or 14,919 x 3880/4761 = 12,158 or 40,000Net gain 14,919 - 2,761 - 2,761 = 9,397

deduct whatever AEA is available to that person and the

net taxable gainis likely to be £0 unless they already have other gains that have used up the AEA that yearThank you for that! Much appreciated

We have the full £12k CG allowances, so I make it £2,604 remaining

You have been extremely knowledgeable and we really appreciate your assistance

May I trouble you to take a look at another 2nd property we own and are considering what to do about the loss of LR and reduction to 9m for PRR next April

We are considering whether to sell from personal names this same tax year and sell to our Limited Company. That way benefiting from the reliefs prior to their reduction, but also moving to the company to avoid personal taxation on rental profits (although these rental profits are minimal)

I believe the company would pay the higher SDLT, as it is effectively a cost to us as directors, I have included this in the calculation

SECOND PROPERTYOWNED 5723 days

LIVED 727 days

LET 4996 days

NET GAIN £ 45,470

INDIVIDUAL GAIN £ 22,735

RELIEFS <2020PRIVATE RESIDENCE RELIEF £ 5,063.07

LETTING RELIEF £ 17,672.07

Lowest of the 3 limits (PRR,LR,£40K) £ 5,063.07

Remaining Gain £ 12,609.00

Allowances £ 2,604.15 (remaining after 1st property sold)

Remaining Gain £ 10,004.85

Tax 18% £ 1,800.87

STAMP DUTY

3% £ 3,750

5% £ 2,000

TOTAL SDLT £ 5,750

TOTAL £ 7,550.87RELIEFS >2020PRIVATE RESIDENCE RELIEF £ 3,975.57

LETTING RELIEF £0

Lowest of the 3 limits (PRR,LR,£40K) £0

Remaining Gain £ 18,759.57

Allowances £ 12,000.00 (new tax year)

Remaining Gain £ 6,759.57

Tax 18% £ 1,216.72SUMMARYRELIEFS <2020£ 7,550.87RELIEFS >2020£ 1,216.72For our specific circumstances, particularly with most of the CG allowances used up with the sale of the 1st property this year, it appears selling in subsequent years would result in less tax