As taxpayers we are familiar with the concept of Capital Gains Tax (CGT) and the related tax implications on the disposal of chargeable capital assets; in particular, on the disposal of second homes, for example, property that is not the taxpayer's only or main residence.

However, for certain specific situations, there is an extremely favourable relief from CGT in the form of Dependent Relative Relief.

Who is classed as a dependent relative?

HMRC's guidance is lengthy on what constitutes a dependent relative and what does not. Broadly, a dependent relative is defined as any relative who is incapacitated by old age or infirmity from maintaining himself or herself, and extends to a mother who is not incapacitated, but is either widowed, or living apart from her husband, or a single woman in consequence of dissolution or annulment of marriage.

In what situation can the relief be claimed?

Dependent relative relief from CGT is only available on a property where the occupation of that dependent relative commenced prior to 5 April 1988 and that property must have been the main residence of the dependent relative.

Are there other eligibility requirements?

You are eligible for the full relief if all of the following conditions are met:

1. The ‘dwelling house’ has been your dependent relative's ‘only’ or ‘main residence’ throughout the ‘period of ownership’

2. The dependent relative must occupy the dwelling-house rent free and without any other consideration;

3. The dependent relative has not been absent, other than for an allowed period of absence or due to living in ‘job-related accommodation’, during your ‘period of ownership’;

4. The ‘garden or grounds’ including the buildings on them are not greater than the ‘permitted area’; and

5. No part of your home has been used exclusively for business purposes during your period of ownership.

If all of the conditions above have been met, you do not need to pay capital gains tax on the eventual disposal of the property for the period the property was occupied by the dependent relative, plus the last nine months of ownership.

Example 1 - where a dwelling qualifies for Dependent Relative Relief up until disposal

Sylvia bought a small ground floor flat on 31 May 1987 for her widowed mother, Joan, to live in rent free. The flat cost £20,000.

Joan lived in the flat up until her death on 1st June 2022. The property was sold at the end of January 2023 for £200,000 resulting in a gain of £180,000.

As all the criteria for Dependent Relative Relief was met and the entire period of ownership including the last nine months qualifies for the relief, Sylvia is eligible to claim the relief on her 2022/2023 tax return and no CGT will be payable,

In addition, as no CGT is due, Sylvia need not complete a 60 Day Capital Gains Tax Reporting declaration.

Example 2 – where a dwelling partially qualifies for Dependent Relative Relief up until disposal

Using the example above but with a disposal date of 31 May 2023, the whole period of ownership would be 432 months (31 May 1987 to 31 May 2023). Joan occupied the property as her main residence for 420 of those months (31 May 1987 to 1 June 2022) in addition, the last 9 months of ownership qualify. Therefore, the total qualifying months is 429 out of the 432 months. The CGT calculation would be as follows: 


Sale proceeds on 31 May 2023                                             200,000

Acquisition cost on 31 May 1987                                          20,000

Gain                                                                                            180,000

Exempt period 429 months out of 432 months            (178,750)

Chargeable gain                                                                      1,250

Provided Sylvia has not used her annual Capital Gains Tax exemption of £6,000 for the 2023/2024 tax year, this will be offset against the chargeable gain and therefore, no tax will be payable. Again, the relief should be claimed on Sylvia's tax return but in this scenario, the gain will fall into the current tax year (2023/2024) and no 60 Day Capital Gains Tax Reporting will be required as there is no tax liability to report.

Be aware of reasons why the relief would not be fully available to claim

• Should there have been a change of occupant after 5 April 1988 the exemption is not allowed for the period after the change, to the date of sale, even if the new occupant is another dependent relative.

• Incapacitated by old age, it is accepted that a relative is incapacitated by old age if he/she is aged over 65 or aged between 55 and 65, unemployed and, due to age, without the capacity to work again in his or her own industry. However, the second test is not met if the relative is unemployed because of a general lack of jobs or if, because of age, the relative chooses not to work.

• Claims for Dependent Relative Relief made by a married person or by a civil partner in respect of a residence occupied by a dependent relative may be tainted as the relief is limited to one dwelling for the same period for married couples/those in a civil partnership.


Laura Brown

Director of Personal Tax