Principal residence tax planning


Written by Ray Coman


Threats and opportunities arise where there is a change in circumstance affecting property ownership. Planning for eventualities can reduce tax and improve cash flow.


Nominating a PPR


Each individual is entitled to one PPR at any time. Typically, the property which is a person's residence is clear from the facts. The residence will be the address on the electoral roll, where the person is registered for council tax and so forth. However, in less typical cases a person may simultaneously have two residences which could both be considered as a PPR. In this situation, a taxpayer can record with HMRC which property should be regarded as the PPR. The nomination must occur with two years of a chance in circumstances. A common change in circumstance is where a person acquires a second residence.

A nomination may be advantageous for tax purposes since if neither property is nominated then whichever is the PPR would be determined on the facts.



There is no requirement for a person's PPR to be situated in the UK. A person who is resident in the UK for tax purposes, would be liable to capital gains tax on worldwide gains.  PPR is therefore particularly effective for individuals arriving in the UK, and subsequently selling their home overseas.

A person who is not resident for capital gains tax purposes will be liable to gains on property disposals.  The gain is calculated using market value at 6 April 2015.  In some limited cases a period of absence from the property while abroad is a deemed period of occupation, and therefore a former home in the UK will remain exempt from capital gains tax.  For this to apply, the owner could not own another property, would have to be employed abroad, and would have to resume occupation of the UK property prior to disposal.


In general, foreign investors in the UK market are not liable to capital gains tax, although income tax, stamp duty and inheritance tax will apply based on the situation of the property.


Company ownership


PPR is not available to companies. In general it is rarely advisable for a company to own residential property.


The taxable gain arises on any part of a dwelling used exclusively for business purposes, even during the final period of ownership.

Marriage and PPR


A potential drawback of being married is that the number of PPRs is reduced to one, however the tax effect is neutralised where a couple live together in a proportionately higher value property.

Transfers between spouses are exempt from capital gains tax. There is therefore no cash flow drawback resulting from an immediate charge to tax when transferring property to a spouse.


In certain cases there is a tax benefit to transferring property into joint names prior to sale. Two lots of annual exemption would be available and it is possible that more of the capital gains would be taxed at a lower rate of 18%. In some cases capital losses brought forward can be used.


In other cases there would be a tax drawback to transferring a property into joint names. Although a transferee spouse will assume the period of ownership of the transferor spouse, a person may only have one PPR at any time. Therefore, the loss of PPR on 50% of the property may be greater than the annual exemption and other benefit enjoyed by transfer of ownership.

When a PPR is transferred to a spouse, the acquiring spouse will be treated as occupying the property as a home for the same length of time as the disposing spouse. Similarly, if a period of deemed occupation is met by one spouse, it will be treated as having been met by both spouses. This tax treatment is often advantageous where a home is transferred on death to the surviving spouse.


Divorce and PPR


In many cases of divorce a property will be eligible for PPR since the final period of ownership (18 months from 6 April 2014) is always a deemed period of ownership. Where the PPR rules do not provide tax relief, property of departing divorcee continues to be eligible for PPR . However since a person can only have one PPR at any time, a person may be liable to capital gains tax if they have owned another property since moving out of the matrimonial home. Further guidance is available in the article relating to capital gains tax on divorce.

Price expectation


The relief is based solely on the overall gain and total number of months in which the property is a PPR. It is not based on the actual increase in value for the period that the property was occupied by the owner. Consequently, if a property rises the most during a period in which it is owner occupied, the tax relief would not fully cover the actual increase in value while it is a PPR. To this extent, a taxpayer could start to lose out if property prices stagnate.

A loss arising on a PPR is not an allowable loss. Consequently, any capital loss on a PPR cannot be set against future capital gains. From a pure tax perspective, loss on a property which is not a PPR is more valuable.


Principal private residence relief can be generous. However, the permutations in which it would be applicable are too numerous and varied to cover in this manual. Opportunities exist to plan one's property affairs so as to avoid taxation and Coman & Co can assist with your requirements.


#9 Ray Coman FCCA, CTA 2018-10-22 12:37
She would need to be living in the property at the date of transfer to inherit your period of PPR. You would therefore meed to both move back in, you transfer half to her and then sell it for her to inherit your earlier period of PPR. However, if it is transferred while you are living in it, it would not have been let by her and therefore she would not also qualify for Lettings Relief.
#8 Michael Liebnitz 2018-10-22 12:33
I moved out of my first flat after living there for 5 years and let it out. I then met and married my wife and I am thinking about selling my home. Will she obtain the PPR and lettings relief?
#7 Ray Coman, FCCA, CTA 2018-10-11 13:59
Dear Pasha,

Transfers between spouse are exempt from capital gains tax. Transfers to an unmarried partner will be subject to capital gains tax. Consideration is the same as market value. This means that the gain will be calculate on half of the market value when you transfer it, less half of the original cost.
#6 Pasha Maaz 2018-10-11 13:58
Hi Ray
Could you please guide me what are the CGT implications if the owner of the house( which is his/both main residence) wants to transfer half of the share of his Principal Private Residence to his UNMARRIED PARTNER ??. Regards
#5 Ray Coman, FCCA, CTA 2018-10-11 13:41
Good question. Section 222(7) TCGA 1992 allows you to inherit your wife’s period of occupation for PPR purposes. However, this will only be the case where the property was your home at the date of the transfer.

The following is the HMRC interpretation of TCGA92/S222 (7) (a) & (b)
You must have been living with your wife at the date of the transfer in order to inherit her periods of ownership and occupation for PPR purposes.
#4 Ian Martin 2018-10-11 13:40
My wife owned a property which was her PPR for 30 months until she moved into my house when we got married. She let her property for 5 years and then transferred ownership into joint name. 5 years after transfer we sold the property and now we need to pay CGT. Are we correct to assume that I will not be entitled to PPR relief or Letting Relief but my wife will be? If so do we calculate her PPR and Letting Relief based upon the total gain or 50%?
#3 Ray Coman, FCCA, CTA 2018-10-11 13:29
Dear Dee,

There are various permutations in your question, too numerous to cover in a brief comment. It is worth pointing out that while a person can only have one PPR, a property can be the PPR of more than one person. In your case, your property is both the PPR of you and of your daughter.

Seek separate legal advice about change in beneficial ownership.
#2 Dee McLeish 2018-10-11 13:28
I have 3 buy to let properties. Two are owned with my son 95/5 to me and one with my daughter 2 third/one third to me. The one owned my daughter and myself was also our residential home for 2.5 years. I also have my original residential home which I solely own and it has been let out but I now intend to move back their with a view to selling it at some point.

I now want to restructure the business to maximise all available tax relief without losing any existing relief available, eg PPR and letting relief.
My husband is about to retire so I would like to structure the business so as to use his tax allowance of £43K. Also, with regard to my original residential home, how I could change the beneficial ownership to include my husband so that on sale his CGT allowance is used and his letting relief.
#1 Raphael Coman, FCCA, 2015-12-10 14:07
Author's note:
PPR relief starts to erode away over time if the property is not a home. If, for instance, the property value did not increase, more of the gain would become taxable over time because the percentage period of occupation will decrease. From a tax perspective, some owners might be better off ‘banking’ the PPR relief, by disposing of the property, and starting afresh with a new buy-to-let. This is subject to the stamp duty rules which are due to be introduced from April 2016 and other transaction costs

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