Last updated: 16 October 2026
The question
I let a room in my home to a lodger, and I run my self-employed business from another room. When I sell, will I be taxed on part of the gain relating to those rooms?
Private Residence Relief
The gain you make when you sell your only or main home is usually free of capital gains tax (CGT) thanks to Private Residence Relief (PRR). PRR can be restricted if part of the home is used exclusively for business, or if part is let out in a way that means you no longer occupy it.
The room let to a lodger
If your lodger lives with you as part of your household, sharing your kitchen and living areas, HMRC treats you as still occupying the whole home. You keep full PRR on that part. This is the usual position where you take in a lodger and use the rent-a-room scheme, which lets you receive up to £7,500 a year tax-free.
If the let part becomes a separate self-contained flat, or the lodger does not share with you, PRR may be lost for that part. Lettings relief can then help, but since April 2020 it only applies where you share occupation of the home with the tenant, and it is capped at £40,000 per person.
The business room
If a room is used exclusively for business, the share of the gain relating to that room is not covered by PRR. If the room is also used for private purposes, such as a guest bedroom or a family study in the evenings, HMRC generally accepts there is no exclusive business use, and PRR is not restricted.
| Use of room | Effect on PRR |
| Lodger sharing your home | No restriction |
| Self-contained let flat | Restricted, lettings relief only in limited cases |
| Room used only for business | Restricted for that part |
| Room used for both business and private life | Usually no restriction |
Worked example
Mark sells his five-room home for a gain of £150,000 after 10 years. One room was used solely as his office for the whole period. One-fifth of the gain, £30,000, relates to the office. After his £3,000 annual exempt amount, £27,000 is taxable at 18% or 24% depending on his income. The lodger’s room is fully covered because the lodger shared the home.
The final nine months
The last nine months of ownership always qualify for PRR if the home was your main residence at some point, even if you have moved out.
Reporting and paying
If CGT is due on a UK residential property, you must report and pay it within 60 days of completion using HMRC’s online property service.
Planning points
- Avoid exclusive business use of any room if you can.
- Keep the lodger arrangement informal and shared.
- If you claim business use of home costs, base claims on time and space without making the room purely business.
Frequently asked questions
Does claiming home office expenses affect PRR?
Only if the room is used exclusively for business.
Do I pay CGT on rent-a-room income?
No. The rent is income; CGT only applies to the gain on sale.
What about a garden or land?
Grounds up to half a hectare are usually covered.
Is lettings relief available for a whole-house let?
No, not since April 2020.
Related: renting a room in your house, working from home and CGT and CGT when selling your home.
Talk to Accotax
Want this handled for you? Our team at Accotax can help with capital gains tax on your home. See our property tax accountants service, or contact us for a free, no-obligation quote.
This page is general guidance based on HMRC rules for the 2026/27 tax year, checked against gov.uk on 16 October 2026. It is not personal advice, so speak to an accountant about your own situation.
