In our weekly series, readers can email any questions about their finances to be answered by our expert, Rosie Hooper. Rosie is a chartered financial planner at Quilter Cheviot and has worked in financial services for 25 years. If you have a question for her, email us at money@inews.co.uk.
Question: My father had a large bill for capital gains tax (CGT) when he sold his house. He lived there for 15 years before separating from my mother and moving out. I continued to live there with my mother and my siblings. He carried on paying the mortgage until 2020, when the house was sold for £220,000 after the death of my mother. He paid £46,000 in CGT. How do I know if this is correct – should he have been able to claim private resident relief on the house?
Answer: CGT is a tax on the profit when you sell something that has increased in value.
Many people assume that CGT on a family home is a box-ticking exercise. If it were the house you grew up in, where one parent stayed for decades and the family never really moved on emotionally, it feels instinctive that it should be treated as a main residence. But the tax system does not work on sentiment, memory or informal family arrangements. It works on legal ownership, periods of occupation and strict definitions set out in law.
Private residence relief is one of the most generous reliefs available in the UK tax system, but it is also one of the most misunderstood.
It is when you do not pay CGT when you sell your home because:
you have one home and you have lived in it as your main home for all the time you have owned it you have not let part of it out you have not used a part of your home exclusively for business purposes the grounds, including all buildings, are less than 5,000 square metres (just over an acre) in total you did not buy it just to make a gainThe relief is not based on who lives in a property, who pays the bills or whether rent is charged. It applies to individuals, not families, and to ownership, not use. That distinction alone catches out a significant number of people.
In simple terms, private residence relief can only be claimed by someone who both owns a property and occupies it as their main residence. If someone moves out, even for reasons that feel entirely reasonable, the clock can start ticking on a potential future CGT bill.
Divorce, separation, new relationships and informal agreements between former partners can all change the tax outcome, even if nothing changes in day-to-day life.
A common assumption is that if a former spouse or partner continues to live in the property, the relief somehow continues by default. In reality, once an individual stops living in a property as their main residence, their entitlement to relief can begin to reduce.
The law does allow for certain final periods of exemption, but these are limited and do not cover long stretches of absence. Paying the mortgage, covering maintenance costs or choosing not to charge rent does not, on its own, preserve relief.
This disconnect between how people organise their lives and how tax law views ownership is where many unexpected tax bills arise. Families often prioritise stability, fairness or informality during difficult life events, particularly after separation or bereavement. From a human perspective, that makes sense. From a tax perspective, it can store up problems that only surface decades later, often when a property is eventually sold.
The same principle applies more broadly beyond the CGT. Ownership matters in inheritance tax, pension death benefits and intestacy rules. Long-standing partners who are not married or in a civil partnership do not benefit from spousal exemptions, no matter how long they have lived together.
Adult children can assume assets will pass smoothly between parents, only to discover that legal formality trumps family expectation.
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This is why property and estate planning issues tend to resurface at moments of transition: sale, death, retirement or major policy change. With pensions due to fall within the scope of inheritance tax from 2027, questions around ownership, beneficiaries and outdated assumptions are coming back into sharp focus.
None of this is about people having done something wrong. In many cases, decisions were made years ago with the best intentions, and at a time when tax rules felt distant or irrelevant. But it does underline an uncomfortable truth: our finances often feel “sorted” because life is ticking along smoothly, not because they have been tested against the letter of the law.
By the time a question is asked after the event, options are usually limited. The real value comes from understanding these rules early enough to make informed decisions, rather than discovering too late that reality and tax law were never quite aligned.
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