When selling a property in the UK, one of the most common questions homeowners ask is:
“Will I have to pay Capital Gains Tax (CGT) on the sale?”
That’s where the 36-month rule comes in — a key tax relief that can help property owners (especially landlords and accidental homeowners) reduce or avoid a CGT bill altogether.
Let’s break down what the 36-month rule means, how it works, and when it applies.
The 36-month rule refers to a period of Capital Gains Tax (CGT) relief for people selling a former main residence in the UK.
In simple terms:
If a property was once your main home, you don’t have to pay CGT on the last 36 months (three years) of ownership — even if you weren’t living there during that time.
This relief is part of what’s known as Private Residence Relief (PRR) — a tax exemption that helps homeowners avoid paying CGT on their main home.
Let’s say:
Even though you rented it out for three years, the 36-month rule means those final years are still treated as if you lived there.
So, you’d pay no Capital Gains Tax on any of the gain made during that time.
It’s important to note that the 36-month exemption no longer applies to most property sales.
In April 2014, the UK government reduced the final period exemption from 36 months to 18 months for the majority of homeowners.
However, the 36-month rule still applies in certain circumstances, including:
When the property owner is disabled, or
When the owner is moving into a care home (and has not acquired another main residence).
In these specific cases, HMRC continues to allow a 36-month final period exemption under Private Residence Relief.
Here’s how the current system works (as of 2025):
Situation
Final Period Exemption
Standard property sale
18 months
Owner disabled or moving to a care home
36 months
That means most sellers can claim 18 months of exemption, while those in special circumstances keep the full 36 months.
Capital Gains Tax applies when you sell a property that has increased in value since you bought it — and it’s not your main home.
You pay CGT on the profit (the “gain”), not the total sale price.
Basic example:
If it was never your main residence, you could owe CGT on that £100,000 (after allowances).
But if it was your main residence at some point, Private Residence Relief — including the 36-month (or 18-month) rule — can reduce or eliminate your tax bill.
Imagine:
You would get:
That means 108 months out of 120 are tax-free — only 12 months of gain might be taxable.
The 36-month exemption is particularly helpful for:
It offers a valuable safety net when life circumstances change.
Keep records of when you lived in the property and any rental periods.
Check eligibility — especially if you or a relative are moving into care.
Use your annual CGT allowance (currently £3,000 for individuals in 2025/26).
Claim Letting Relief if part of the property was rented while you still lived there.
Seek professional advice — property tax can be complex, and mistakes are costly.
The 36-month rule is a Capital Gains Tax exemption period that lets certain UK property owners avoid tax on the final three years of ownership — even if they weren’t living there.
In short:
Understanding which applies to you could save you thousands in tax when selling your property.
Key Takeaway:
👉 The 36-month rule offers valuable tax relief when selling a former main residence — especially for those entering care or living with a disability.
