The main residence election that decides your CGT

You pay no capital gains tax on a home covered by private residence relief, but if you genuinely live in two homes, only one can be your main residence at a time. Which one is a choice you are allowed to make, by nominating in writing to HMRC, and the difference is measured in thousands of pounds. Tax depends on your personal circumstances, and this is general information rather than advice.

The two-year window

The nomination rules are set out in HMRC's private residence relief help-sheet HS283. You must nominate within two years of the date you first hold a particular combination of residences, and every time that combination changes, a new two-year window opens. For example, HMRC says buying a second home in May 2024 gives you until May 2026 to choose either property.

The mechanics matter. Under the guidance on nominating a home, the nomination is a letter to HMRC giving the address, signed by every owner of the property. Married couples and civil partners get one main residence between them, with the two-year clock starting at the marriage if each brought a home to it. Miss the window and no election exists — which home was your main residence is then decided on the facts when you sell, and you have no say in it.

What a nomination actually does

The nominated property collects private residence relief for the nominated period, and the other property loses it for the same period. You can vary a nomination later, so the election is not a one-way door. One quirk rewards attention — the final nine months of ownership of any property that has ever been your main residence always qualify for relief, however you were using it at the end. Even a brief nomination of a second home therefore banks nine months of relief on it, at a usually smaller cost to the other property.

A worked example

Suppose you bought a city flat for weekday use, owned it for ten years, 120 months, and sold it at an £80,000 gain, while also owning the family house. You nominated the flat as your main residence for four years, 48 months, in the middle of ownership.

Relief covers the 48 nominated months plus the final 9, so 57 months out of 120. That exempts £38,000 of the gain, leaving £42,000 chargeable, £39,000 after the £3,000 annual exempt amount, and £9,360 of tax for a higher-rate taxpayer at the 24% residential rate.

With no nomination, and the facts pointing to the family house, only the final 9 months are relieved — £6,000 exempt, £74,000 chargeable, £71,000 after the exempt amount, £17,040 of tax. The letter to HMRC was worth £7,680.

When you cannot elect

The election only chooses between properties you genuinely live in as homes. A buy-to-let you have never occupied is not a residence and cannot be nominated, and HMRC judges occupation on its quality, not on paperwork — post redirected to a flat you rarely sleep in does not make it a residence. If only one property is actually your home, there is nothing to elect and the facts stand.

The deadlines around the sale

Whichever way the relief falls, UK residents must report and pay capital gains tax on a residential property sale within 60 days of completion, so the relief position needs working out before the sale, not at tax return time. We cover the wider mechanics in our separate article on capital gains tax when selling a rental property.

If a sale of one of the homes is on the horizon, line the legal work up early — you can compare conveyancing quotes for the sale from regulated firms in a couple of minutes.