If you’re thinking about selling your garage but aren’t sure whether you’ll have to pay tax, you’re in the right place. In this blog, we’ll explain what taxes, such as Capital Gains Tax, may apply, and how things like Private Residence Relief could reduce or even eliminate your tax bill entirely.

Do I have to pay tax when I sell my garage?

It depends on how the space was used, and whether it’s increased in value. Selling (or ‘disposing’ of) an asset which increases in value over time usually triggers a need to pay Capital Gains Tax, unless you’re selling a private residence which is your main home. That tends to be exempt unless you’ve used part of it commercially.

For example, if you used your garage for business purposes, then its sale might be subject to Capital Gains Tax. But if the garage is part of your primary residence, and used solely for personal reasons, it could qualify for Private Residence Relief (PRR) and you won’t need to pay Capital Gains Tax on it.

What is Private Residence Relief?

Private Residence Relief is a type of tax relief which applies to Capital Gains Tax if you sell your only or ‘main’ home. You’ll sometimes see it referred to as the Main Residence Exemption – they’re the same thing!
 

Is my garage covered by the main residence exemption?

The rules are a bit more complicated if you’ve been using the garage for a business, or if you’re selling it separately to your home. You might still be able to claim relief if it meets certain conditions. To qualify for Private Residence Relief (PRR) your garage must be:

• Part of the Dwelling House: A ‘dwelling house’ is a property used as a private residence rather than for commercial or business reasons. For your garage to be considered part of the dwelling house it must be obvious that its usage is connected to the main home. That doesn’t mean it needs to be physically attached.
• Permitted area: You automatically qualify if the total size of your property (the house, garden, garage, and any other buildings) is half a hectare or less (a little over one acre). You must show you need all of the space for normal living and enjoyment of your home if your property is bigger than that.
• Not exclusively for business use: The garage can’t have been used exclusively for business reasons, such as having your office, salon, or workshop in there. Occasional or temporary use can be accepted, but exclusive use may limit the relief you can claim.
• Not let out: You must not have let your garage out commercially

What if I only used my garage for business purposes?

You won’t be able to claim Private Residence Relief if you use your garage entirely for business purposes. If you’re selling your home and garage together at the same time and used your garage for business, then you might need to pay Capital Gains Tax on the portion of the gain that relates to your garage.

The good news is if your garage was used for both personal and business purposes – for example you run a barber shop in part of it, but you also park the family car there overnight and use it to store personal items – it could still qualify for PRR. It gets quite complicated so it’s best to speak to an accountant to see what you can claim.

Working out the gain when you’ve used your garage entirely for business purposes

You’ve sold your private home, but you used the garage to run your business. The first step is to work out your total capital gain by starting with what you sold the asset for, then subtracting how much you originally paid for it and any other eligible costs.

The next step is calculating how much of the gain relates to your business. If the garage was used purely for business purposes then you’ll pay tax on the part of the profit that relates to the garage. The taxable amount is based on the garage’s share of the total floor area.

For example, if the garage takes up 10% of the property, then 10% of the total gain is taxable.
 

The annual exempt amount

Everyone gets a £3,000 allowance for Capital Gains in the 2025/26 tax year, so only the part of your gain above this amount is taxed. If your taxable gain is below the threshold then there’s no tax to pay, and you won’t need to report it.

What if I sell the garage at a loss?

Qualifying to pay Capital Gains Tax on any gain you make means you’re also able to claim a capital loss. You can offset it against any capital gains you might have from other assets that year.

Do I report the sale on my tax return?

You can either report the gain or loss on your tax return if you normally submit one, or using the online Capital Gains Tax service within 60 days of completing the sale.

 
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