Private Residence Relief when there are UK and overseas homes
20th March 2026
Posted in Articles, Principal Private Residence Relief by Andrew Marr
Principal Private Residence Relief (‘PPR’) can provide a full or partial exemption from capital gains tax on the disposal of an individual’s home (or more precisely a property that has been occupied as an individual’s main residence at some point during the period of ownership). However, complications can arise where an individual has an ‘interest’ in more than one property, and even more so when those properties are in different tax jurisdictions. As a result, individuals with a ‘home’ in more than one jurisdiction must carefully navigate the PPR rules to ensure that the relief is correctly claimed, so as to avoid unexpected capital gains tax liabilities on a future disposal.
Permitted absences
Even when a property is not occupied on a full-time basis, certain periods of absence may still qualify as periods of deemed occupation and so that PPR can apply in full, provided that the property remains the only or main residence, or has been nominated as such. In most cases, for these provisions to apply the property must have been occupied by the owner both before and after the period of absence.
There are three categories of absence that qualify and these are as follows:
- Where the owner is working abroad, the period of deemed occupation is not subject to any time limit.
- Where the owner is required to work elsewhere in the UK (but not overseas), the period of deemed occupation is limited to four years.
- Any other period of absence for any reason of up to three years will also qualify as deemed occupation.
More than one property
An interest in a property includes a leasehold interest, and so a taxpayer can be considered to have two residences for PPR purposes even if one is only occupied under a tenancy agreement. The relief applies to an individual’s ‘only or main residence’, which is determined as a matter of fact. Where two or more properties are involved, a nomination can be made to choose which should be treated as the main residence, and this must be made within two years from the date on which the taxpayer acquired the second interest. The nomination is only available where both properties have been occupied by the taxpayer at some point. A further complication arises where a property is located in a jurisdiction different than that of the taxpayer’s residence at the time of disposal. The taxpayer must then satisfy a 90-day occupancy test for each tax year for which the PPR is claimed. This requirement applies equally to UK residents disposing of overseas properties and to non-UK residents disposing of UK properties.. If no nomination is made, HMRC will determine the main residence based on the facts. Where an individual leaves the UK to work full time abroad, the main residence would normally be the overseas property.
Example
Lewis was a UK resident owning a single UK property in Stevenage, which he occupied as his home. Some years ago, he took up a work opportunity in Monaco and decided to purchase a penthouse flat to live in whilst working there. During his time overseas, he retained his UK property and rented it out. After a decade abroad, having grown weary of champagne and fast cars, Lewis decided to return to the UK. Prior to his return, the tenants vacated the UK property, and he moved back into it before subsequently disposing of it.
Lewis was unaware that he was able to make a nomination for his UK property to continue to be treated as his main residence and, as a result, failed to meet the two-year election deadline. Consequently, for the period he worked overseas, as a matter of fact, the overseas property would have been classed as his main residence. The deemed occupation provisions were therefore not available in respect of the UK property. As a result, for the period of absence from the UK property, Lewis will be exposed to capital gains tax on a proportion of the gain arising on its disposal. Although PPR will not apply to the full period of ownership, relief will still be available for the actual occupation and the final nine months prior to disposal, as the property was occupied as the main residence both before and after his time abroad. As Lewis returned to the UK prior to disposing of the UK property, we do not need to consider the 90-day occupation rule in this instance.
To mitigate this exposure, had he known, Lewis could have made a nomination within the two-year time limit to treat his UK property as his main residence while overseas. If he had done so, the UK property could have qualified for full PPR, as the period spent working abroad would have fallen within the first deemed occupation provision, which is not subject to a time limit. Lewis is unable to make a late nomination, as more than two years have passed since he came to own two residences. Had he rented as opposed to owning his property in Monaco then he would have had the opportunity to extend the time limit to make a late election, as this concession is only available where one of the properties has no capital value (e.g. a short leasehold interest).
The good news for Lewis is that any UK capital gains tax arising on the disposal of the Monaco flat would qualify for PPR for its period of occupation, although this was of little value to him as he sold the property while non-resident before returning to the UK, and no tax was payable in Monaco. Had Lewis sold the overseas property after once again becoming UK tax resident, then the availability of PPR would have been of benefit to him, given that no tax was charged in Monaco. However, in most overseas jurisdictions (for example had his property been just down the road in Nice) then he would have suffered local capital gains taxes first, which would not be relieved under most double tax treaties. His UK tax liability would then have been significantly if not entirely mitigated by a credit for overseas tax paid, meaning that the availability of PPR on the gain would have been largely academic.
Forbes Dawson view
Despite the PPR exemption having been in place for many years, the rules continue to evolve, and we frequently see individuals fall into common pitfalls due to a lack of timely tax advice. When a second interest in a personal residence is acquired, it is essential to consider whether a nomination should be made within two years of the point at which the individual has two or more residences. This ensures that the deemed occupancy provisions can continue to apply and avoids unnecessary exposure to capital gains tax. If an individual was unaware that they were able, or needed, to make the election then living in rented accommodation while overseas may have provided them with a ‘get out’, as it could have allowed for an extension of the two-year time limit.
