Capital Gains Tax Relief

The 36 month rule for capital gains tax on property

If you have ever lived in a property as your main home, the final period of ownership may be exempt from Capital Gains Tax when you sell. This guide explains how the 36 month rule works, why it changed in 2020, and what it means for you today.

Tax rules around property can feel overwhelming, especially when you are dealing with an inherited home or a property you have moved out of. We are here to help you understand your options. Please remember that this guide provides general information only - always speak to a qualified tax adviser before making financial decisions.

Free valuation. No obligation. No fees.

The Basics

What is the 36 month rule for capital gains tax?

The 36 month rule is the commonly used name for the final period exemption within Private Residence Relief (PRR). Put simply, if a property was your main home at any point during your ownership, the last portion of your ownership is automatically exempt from Capital Gains Tax - even if you are no longer living there when you sell.

The name comes from the original version of this relief. Before April 2014, the final period exemption covered the last 36 months (3 years) of ownership. This gave property owners a generous window to sell without CGT applying to that final period, which was particularly helpful for people who had moved out of a property but had not yet sold it.

However, this rule has been significantly reduced over the years. Understanding the current position - and the exceptions where 36 months still applies - is essential if you want to make the most of the relief available to you.

Key Change

The rule changed in April 2020 - from 36 months to 9 months

Important: The 36 month period no longer applies to most people

Since 6 April 2020, the standard final period exemption has been 9 months, not 36 months. Many online sources still refer to the old 36 month rule, which can be misleading. Make sure you are working with the current figures.

The final period exemption has been reduced twice since the original 36 month rule was introduced. Here is how the timeline breaks down:

36 months

Before April 2014

The original final period exemption gave owners a full 3 years of CGT-free ownership at the end

18 months

April 2014 to March 2020

The exemption was halved to 18 months as part of wider CGT reform measures

9 months

April 2020 onwards (current)

The current standard final period exemption for most property owners

Who still gets 36 months?

Two groups of people still benefit from the full 36 month final period exemption:

• Disabled individuals - as defined under HMRC's qualifying conditions
• Care home residents - people who have moved into a care home and are selling their former main residence

If you or a family member falls into either of these categories, the extended 36 month exemption can provide significant tax savings. A qualified tax adviser can confirm whether the conditions are met and help you plan accordingly.

Inherited Property

How the 36 month rule relates to inherited property

When someone passes away and leaves a property to their beneficiaries, Capital Gains Tax may apply if the property is later sold for more than its probate value (the market value at the date of death). The final period exemption can play an important role in reducing or eliminating this tax liability, depending on the circumstances.

If the deceased lived in the property as their main residence, the personal representatives (executors or administrators) may be able to claim Private Residence Relief. Where the property is sold within two years of death, this can eliminate CGT entirely. The final period exemption is a separate but related relief that adds further protection.

For beneficiaries who inherit a property and then move into it as their own main home, the final period exemption becomes directly relevant. If you later move out and sell, the last 9 months of your ownership are automatically exempt from CGT. If you are disabled or in a care home, you benefit from the full 36 months instead.

Deceased lived in the property

If the deceased used the property as their main home, PRR may apply when the personal representatives sell within 2 years of death. The final period exemption provides additional cover if you, as the beneficiary, move in and later sell.

Beneficiary moves in then sells

If you inherit a property and make it your main home, you get PRR for the time you live there plus the 9 month final period exemption when you move out and sell. This can significantly reduce any CGT liability.

Property was not the deceased's home

If the property was a buy-to-let or second home, PRR will not apply based on the deceased's use. You could still claim PRR (and the final period exemption) if you move into the property as your own main home before selling.

Deceased was disabled or in care

If the deceased was a disabled person or care home resident and the property was their main home, the extended 36 month final period exemption may apply, giving the estate more time to sell with CGT protection.

Understanding the Difference

The 2 year rule vs the 36 month rule

These two rules are often confused, but they serve different purposes and apply in different situations. Understanding how they interact is important for anyone selling an inherited property or a former main home.

2 year rule

Private Residence Relief on inherited property

• Applies specifically to inherited property
• Requires the deceased to have lived in the property as their main home
• Property must be sold within 2 years of the date of death
• Can eliminate CGT on the entire gain if conditions are met
• The 2 year clock runs from date of death, not from when probate is granted

36 month rule (now 9 months)

Final period exemption

• Applies to any property you have lived in as your main home
• You must have used the property as your main residence at some point during ownership
• The last 9 months of ownership are exempt (36 months for disabled/care home residents)
• Covers a portion of the gain, not necessarily the whole amount
• Applies automatically - no need for the property to be inherited

How they work together

If you inherit a property where the deceased lived as their main home, selling within 2 years may give you full PRR - meaning no CGT at all. If you also move in and later sell after moving out, the final period exemption provides an extra layer of protection. These reliefs can overlap and complement each other, but the calculations can be intricate. Professional tax advice is strongly recommended.

Practical Guidance

What this means when selling inherited property

Understanding the final period exemption and how it interacts with other reliefs can help you make better decisions about when and how to sell. Here are the key practical considerations.

Time is your most valuable asset

Whether you are relying on the 2 year PRR window or the 9 month final period exemption, delays cost money. Every month the property sits unsold is a month where values can change and relief windows can close. Planning your sale early gives you the best chance of maximising your tax position.

Get the probate value right

The probate value is the base cost for CGT. If the valuation is too low, the taxable gain when you sell will look larger than it should be. An accurate probate valuation protects you from paying more CGT than necessary and provides a solid foundation for any relief calculations.

Consider who sells the property

If the personal representatives sell the property before distributing the estate, any CGT liability falls on the estate. If the property is transferred to a beneficiary first, the beneficiary is responsible for CGT. Each route has different implications for reliefs and allowances - your tax adviser can help decide the best approach.

Keep records of everything

HMRC may ask for evidence of when you lived in the property, what improvements you made, and what costs you incurred. Keep receipts, correspondence, and records of your residence history. Good record-keeping makes claiming reliefs smoother and provides protection if HMRC queries your return.

Check for multiple reliefs

You may be eligible for more than one relief. Private Residence Relief, the final period exemption, your annual CGT allowance, and deductible expenses can all work together to reduce or eliminate your tax bill. A qualified adviser can identify every relief available to you.

Report within 60 days

If you sell a UK residential property and there is a chargeable gain, you must report it to HMRC and pay the CGT within 60 days of completion. This deadline applies even if reliefs reduce the gain to zero - you may still need to file. Missing this deadline can result in penalties and interest.

Speed Matters

How selling quickly to a cash buyer helps maximise tax relief

When CGT relief depends on selling within specific timeframes, the speed and certainty of your sale becomes critically important. A traditional property sale through an estate agent can take 4 to 6 months or longer, with no guarantee of completing on time. For inherited property where the 2 year PRR window or the final period exemption is at stake, that uncertainty can cost you thousands in avoidable tax.

Complete in 7-14 days

Once probate is in place, we move fast

Protect your relief window

Stay within the 2 year or 9 month deadline

No chain, no risk

Cash purchase with no fall-through risk

Stop ongoing costs

No more council tax, insurance, or upkeep

At housebought4cash.com, we understand the time-sensitive nature of selling inherited property. We can make you a fair cash offer within 24 hours and complete the purchase in as little as 7 to 14 days once probate has been granted. There is no chain, no estate agent fees, and no need to make repairs or clear the property first.

Selling quickly does not just help with CGT relief windows. It also stops the ongoing costs of holding an empty property - council tax, insurance, maintenance, and the worry that comes with looking after a home that is sitting vacant. We know this is a difficult time, and we are here to make the process as straightforward and stress-free as possible.

Get a no-obligation cash offer for your inherited property. We buy houses in any condition, anywhere in England and Wales.

Free valuation. No obligation. Sell quickly to protect your tax relief.

Frequently Asked Questions

36 month rule and final period exemption - your questions answered

The final period exemption and its interaction with other CGT reliefs can raise many questions. Here are clear answers to the most common ones we hear.

The 36 month rule refers to the original version of the final period exemption for Private Residence Relief. Before April 2014, if a property had been your main home at any point during ownership, the last 36 months of ownership were automatically exempt from Capital Gains Tax - even if you were no longer living there. This period was reduced to 18 months in April 2014, and then to 9 months from April 2020. The 36 month exemption still applies for disabled individuals and those living in a care home.

For most people, no. The standard final period exemption was reduced from 36 months to 9 months in April 2020. However, the 36 month exemption still applies in two specific situations: where the property owner is a disabled person (as defined by HMRC), or where they are a resident in a care home. If you fall into either of these categories, you may still benefit from the full 36 month final period exemption. For everyone else, the last 9 months of ownership are exempt. Always check with a qualified tax adviser to confirm your eligibility.

If you inherit a property and move into it as your main residence, the final period exemption applies when you later sell it. The last 9 months of your ownership (or 36 months if you are disabled or in a care home) are automatically exempt from CGT, regardless of whether you are still living there at the time of sale. This works alongside Private Residence Relief for the period you actually lived in the property. For inherited properties where the deceased lived there as their main home, the personal representatives may also be able to claim PRR if the property is sold within two years of death.

These are two different CGT reliefs. The 2 year rule relates to Private Residence Relief on inherited property - if the deceased lived in the property as their main home and it is sold within 2 years of death, the gain may be fully exempt from CGT. The 36 month rule (now 9 months for most people) is the final period exemption, which applies to anyone who has lived in a property as their main home at some point during ownership. The last 9 months of ownership are automatically exempt. These reliefs can work together but apply in different circumstances. A tax adviser can help you understand which reliefs apply to your situation.

Yes. If you are a disabled person as defined under the relevant legislation, you retain the 36 month final period exemption rather than the standard 9 months. This means the last 36 months of ownership are CGT-free, provided the property was your main home at some point. The definition of disability for this purpose is set out in HMRC guidance and aligns with specific criteria. It is important to seek professional advice to confirm you meet the qualifying conditions and to ensure you claim the relief correctly.

Yes. If you move into a care home and the property was previously your main residence, the extended 36 month final period exemption applies. This means the last 36 months of ownership are exempt from CGT, giving you more time to sell the property without facing a tax bill on that portion of the gain. This is a valuable relief for individuals who have moved into residential care and need to sell their former home to fund care costs. Professional advice is recommended to ensure all conditions are met.

The calculation works by dividing your total period of ownership into exempt and non-exempt periods. The period you lived in the property as your main home is exempt under Private Residence Relief. The final 9 months (or 36 months if disabled or in a care home) are also exempt, even if you were not living there. The remaining period is potentially chargeable to CGT. The taxable gain is then the proportion of the total gain that relates to the non-exempt period. You can also deduct your annual CGT allowance and any allowable expenses. The maths can become involved, so a tax adviser is the best person to run the numbers for you.

Yes. Timing is critical when it comes to the final period exemption and other CGT reliefs. The longer a property sits unsold, the greater the risk that property values change and the more likely it is that you drift outside a relief window. Selling to a cash buyer like housebought4cash.com means you can complete the sale in as little as 7 to 14 days, helping you stay within the final period exemption window or the 2 year PRR deadline. A fast, certain sale removes the risk of chain collapses and delays that can cost you thousands in avoidable tax.

This page provides general information only and does not constitute tax, legal, or financial advice. Tax rules and rates are subject to change. Always consult a qualified tax adviser before making decisions about property and Capital Gains Tax. housebought4cash.com is a property buying company and does not provide tax advice.

We Understand This Is a Difficult Time

Need to sell an inherited property?

Get a fair cash offer for your inherited house within 24 hours. No obligations, no estate agents, no chain. We buy probate properties in any condition.

Cash offer in 24 hours

We buy before or after probate

Any condition - no repairs needed

Free inherited property valuation. No obligation. No catches.