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Lived-in property and outbuilding let as a holiday letting: How do you calculate CGT and PPR relief?

Question:

I live at a property which has an outbuilding (let out as a holiday letting) next to it. Both buildings would be sold together. How would capital gains tax (CGT) be calculated on it, please? I understand the proceeds have to be apportioned between the two, likewise the base cost. How would apportionment be made? Would each asset need to be given a valuation (main residence and holiday letting), with the holiday letting shown as a separate disposal for CGT purposes? Or is it one calculation for the whole sale adjusted for principal private residence (PPR) relief purposes and the length of time the holiday letting existed to arrive at the gain? 

Arthur Weller replies:  

If you look at HMRC’s Capital Gains Manual at CG64311, you can see that it states: ‘However, if the owner of the dwelling-house lets part of the dwelling-house as a self-contained flat which, for example, is accessed separately to the main house, the self-contained flat will itself be treated as a separate dwelling-house.’ So HMRC is saying that as far as CGT is concerned, you are selling two separate properties. For both parts, you have to separately have a base cost, and a sale proceeds. PPR relief will be available for the main house that you have lived in but not for the outbuilding that you have let out. 

I live at a property which has an outbuilding (let out as a holiday letting) next to it. Both buildings would be sold together. How would capital gains tax (CGT) be calculated on it, please? I understand the proceeds have to be apportioned

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This question was first printed in Property Tax Insider in February 2025.