The 36-month rule was a crucial Capital Gains Tax (CGT) relief that allowed UK property owners to claim full tax exemption on the final three years of ownership when selling their main residence-even if they weren’t living there during this period-though this generous timeframe has since been dramatically reduced, first to 18 months in 2014 and then to just 9 months from April 2020. According to recent tax data from HMRC, this change has impacted thousands of property transactions annually, with approximately 15-20% of residential sales now potentially facing increased CGT liabilities compared to when the full 36-month exemption was in effect.
What is the 36-month rule for capital gains tax?
The 36-month rule formed an important part of Principal Private Residence (PPR) Relief, designed to provide homeowners a fair tax treatment when selling property that had been their main home. The concept behind this tax relief was simple-if you needed to move out of your property before selling it (perhaps due to job relocation, family circumstances, or market conditions), the government would still consider it your main residence for tax purposes during the final period of ownership.
This generous provision has undergone significant changes over the past decade:
Pre-April 2014: Full 36-month (3-year) exemption period
April 2014 – April 2020: Reduced to 18-month exemption period
April 2020 onwards: Further reduced to just 9-month exemption period
These reductions represent the government’s efforts to limit tax advantages for property investors while still providing some reasonable window for genuine homeowners to sell their property without undue tax penalties.
Who Still Qualifies for the Full 36-Month Exemption?
While most homeowners now face the shortened 9-month exemption period, certain groups remain eligible for the full 36-month relief:
Individuals with disabilities
People who have moved into long-term residential care
Those who sold their properties before 6 April 2014
This special provision acknowledges that vulnerable individuals often require additional time and flexibility when managing property sales.
Are There Any Exceptions to the Current 9-Month Rule?
While the standard exemption period is now 9 months for most sellers, certain situations still qualify for the full 36-month exemption:
Disabled homeowners or those with severe mental impairment
Individuals who have moved into residential care homes
Properties sold before April 2014
Additionally, other reliefs and allowances might apply to your situation, including:
Transfers between spouses (which are exempt from CGT)
Job-related absence relief for certain employment situations
The £3,000 annual CGT allowance (2025/26 tax year)
What expenses can I deduct from my CGT bill?
You can reduce your CGT bill by deducting certain costs:
- Stamp duty paid when buying the property
- Estate agent and solicitor fees
- Costs of improvement works (not regular maintenance)
How is capital gains tax calculated on property?
Capital gains tax on property is calculated based on the profit you make when selling. Here’s a simple breakdown:
- Work out your gain: Sale price – Purchase price – Improvement costs
- Deduct your tax-free allowance (£3,000 for 2024/25)
- Calculate the tax owed based on your tax band.
| Tax Band | Basic Rate | Higher Rate |
|---|---|---|
| CGT Rate | 18% | 28% |
Remember, these rates are for residential property. Other assets have different rates.
Tip: Keep detailed records of all improvements you make to your property, as these can be deducted from your gain.
What about private residence relief?
Private residence relief can help reduce your capital gains tax bill. If you’ve lived in the property as your main home for the entire time you’ve owned it, you won’t pay any capital gains tax when you sell.If you’ve only lived there for part of the time, you’ll get relief for:
• The time you lived there
• The last 9 months of ownership (or 36 months if you qualify for the exception).
Tip: If you have more than one property, you can nominate which one is your main residence for tax purposes. This can be a useful tax planning tool.
Do I have to pay capital gains tax if I sell my house and buy another?
If you’re selling your main home and buying another, you usually won’t have to pay capital gains tax. However, if you’ve let out part of your home or used it for business, you might have to pay some tax on the profit.
How to Calculate Your CGT Liability Under Current Rules?
When selling a property that wasn’t your main residence for the entire ownership period, calculating your potential CGT liability involves several steps:
Determine the total gain (selling price minus purchase price and eligible costs)
Calculate the proportion of ownership covered by exemptions (actual occupancy plus final 9 months)
Apply this proportion to your total gain to find your exempt amount
Subtract your annual CGT allowance (£3,000 in 2025/26)
Apply the appropriate CGT rate to the remaining gain (18% for basic rate taxpayers, 24% for higher rate)
How long do you need to live in a house to avoid capital gains tax?
There’s no set time you need to live in a house to avoid capital gains tax entirely. However, the longer you live in the property as your main home, the less tax you’re likely to pay when you sell.
Reporting & paying capital gains tax
Since April 2020, you need to report and pay any capital gains tax on UK residential property within 60 days of completion. This is a big change from the previous system, where you could wait until your annual tax return.Tip: Set a reminder for yourself as soon as you agree to sell your property to ensure you don’t miss this deadline.
How the Current 9-Month Rule Works in Practice?
Let’s examine how the current 9-month rule affects property sellers through a practical example. Consider the case of Eleanor from Bedford, who purchased her home in 2015 for £275,000 and lived there until 2022 when she relocated for work. She finally sold the property in May 2025 for £395,000.
When calculating her CGT liability, Eleanor can claim:
Full exemption for the 7 years she lived in the property (2015-2022)
Full exemption for the final 9 months of ownership (September 2024-May 2025)
The remaining period (January 2022-September 2024) is potentially taxable
Eleanor was dismayed to discover she faced a significant tax bill because of the rule change-had the 36-month rule still been in effect, her entire ownership period would have been exempt. After struggling with complicated calculations and facing unexpected tax liabilities, Eleanor contacted Property Saviour for advice. Our team was able to provide options including a straightforward cash purchase that simplified her situation and removed the uncertainty of a prolonged market sale.
The following table illustrates how the rule changes have affected CGT exposure for property sellers over time:
| Exemption Period | Years Applicable | Final Exempt Period | Impact on Sellers |
|---|---|---|---|
| 36-month rule | Pre-April 2014 | 3 years | Minimal CGT exposure, generous window to sell |
| 18-month rule | April 2014-2020 | 1.5 years | Moderate CGT exposure for longer absences |
| 9-month rule | April 2020-Present | 9 months | Significant CGT exposure, tight selling window |
As this table demonstrates, the progressive reduction in the exemption period has substantially increased potential tax liability for homeowners who don’t sell quickly after moving out. This makes timing particularly crucial in today’s property market, where extended sales processes can lead to unexpected tax consequences.
The 36-Month Rule for Lettings Relief: Another Lost Benefit
Alongside changes to the final period exemption, the government also modified lettings relief rules in April 2020. Previously, property owners could claim up to £40,000 in additional relief if they had let out their former home. Under the old system, this relief worked alongside the 36-month rule to provide substantial tax advantages.
The current rules restrict lettings relief only to situations where homeowners shared the property with their tenants (known as “shared occupancy”). This represents another significant reduction in tax benefits for those who once lived in their properties before letting them out.
Is It Possible to Avoid Capital Gains Tax When Selling Property?
While the 36-month rule reduction has limited options for CGT mitigation, several legitimate strategies remain available:
Ensuring you claim all eligible expenses when calculating your gain
Timing your sale to utilize your annual CGT allowance effectively
For couples, transferring a portion of ownership to a spouse in a lower tax bracket
Moving back into the property before selling (making it your main residence again)
Considering auctioning a house for a quicker sale to reduce the non-exempt period
What Reddit Sellers Say About the 36-Month Rule Change?
We’ve noticed some interesting discussions about the rule change on property forums. One prevalent pattern shows many homeowners only discovering the rule change after they’ve already moved out, leaving them with unexpected tax bills. As one commenter noted: “I moved out in 2021 thinking I had three years to sell without CGT implications-only to discover the rule had changed to 9 months. That’s barely enough time to complete renovations before selling, let alone accommodate market fluctuations.”
At Property Saviour, we’ve found that this knowledge gap often leads to sudden urgency when sellers realise their tax-efficient window is closing. For those caught in this situation, our cash house buyer service provides a reliable exit strategy without the extended market exposure that could increase tax liability.
Does the 36-Month Rule Apply to Buy-to-Let Properties?
The 36-month rule (now 9-month rule) only applies to properties that were your main residence at some point during ownership. Pure buy-to-let investments that were never your primary home don’t benefit from Private Residence Relief or the final period exemption. However, if you previously lived in the property before converting it to a rental, you can claim exemption for the period you lived there plus the final 9 months of ownership.
For property investors with multiple holdings, the tax landscape has become significantly more challenging since the reduction of this relief. Understanding exactly which properties qualify for what relief has become increasingly important for effective tax planning.
How Does the 9-Month Rule Impact Property Flippers and Developers?
Property developers and “flippers” who purchase properties with the intention of renovating and selling for profit typically don’t benefit from Private Residence Relief or the 9-month rule, as these properties aren’t usually their main residences. For these individuals, profits are generally considered income rather than capital gains, potentially attracting even higher tax rates.
If you’re involved in property development and facing complex tax situations, speaking with specialists is essential. Property Saviour works with many developers and can offer guaranteed purchase options when time constraints make market sales problematic.
Planning Your Property Sale Around the 9-Month Rule
With the reduced timeframe, careful planning becomes essential when selling a property that was once your main residence:
Consider moving back into the property before selling if practical
Time your sale to coincide with the tax year that’s most advantageous for your circumstances
Keep meticulous records of all improvement costs to offset against any gain
Consider alternative sale methods if time is of the essence
When facing tight deadlines or complex tax situations, many sellers find that using a professional we buy any house service provides peace of mind. At Property Saviour, we understand the stress that tax deadlines can create. Our team offers not just a quick purchase solution, but genuine support and understanding during what can be a complicated process.
Property Sales in a Post-36-Month Rule World
The reduction of the 36-month rule to just 9 months represents a significant shift in UK property taxation. For homeowners, this change means being much more strategic about when to sell after moving out. For investors, it further erodes the tax advantages once available when disposing of former residences.
If you’re concerned about potential Capital Gains Tax implications when selling your property, or if you need a quick, guaranteed sale to stay within the 9-month window, remember that Property Saviour is here to help. Our team combines property market expertise with a human approach-we understand that behind every property transaction is a person making important life decisions. Whether you need advice on timing your sale or a rapid, certain completion, we’re here to provide solutions tailored to your unique circumstances.
Don’t let tax complications add unnecessary stress to your property journey. With proper planning and the right support, facing the current 9-month rule can still result in a positive outcome for your property sale.
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