ACCA Applied Skills · Taxation (UK)

The basic principles of computing gains and losses: formula sheet

Full chapter guide

Key formulas

Three tests for a CGT charge: Chargeable person + chargeable disposal + chargeable asset = chargeable gain or allowable loss; All three must be met. If an asset is exempt, the loss is also ignored.
Statutory residence test: automatic UK residence: 183 or more days in the UK = automatically resident; fewer than 16 days = automatically not resident; For 16 to 182 days, use the ACCA table of days and UK ties. It depends on whether the person was previously resident.
Tie thresholds, previously resident: 16 to 45 days: 4 ties; 46 to 90: 3 ties; 91 to 120: 2 ties; 121 to 182: 1 tie; Resident if the person has at least this many ties.
Tie thresholds, not previously resident: 16 to 45 days: automatically not resident; 46 to 90: 4 ties; 91 to 120: 3 ties; 121 to 182: 2 ties; Resident if the person has at least this many ties.
Gift disposal proceeds: Gifts, and sales at undervalue to connected persons = deemed made at market value; exceptions: transfers to a spouse or civil partner living together (no gain, no loss) and gifts of chargeable assets to a charity (proceeds equal to cost, so no gain or loss); The exceptions are not exempt assets. The asset is still chargeable, but no gain or loss arises on the transfer. The spouse rule and the charity rule are separate rules.
CGT annual exempt amount (for reference): £3,000 per individual; Given in the tax tables. It is applied after gains are computed.
Chargeable gain proforma: Proceeds − incidental costs of disposal = net proceeds; net proceeds − (cost + incidental costs of acquisition + enhancement expenditure) = chargeable gain; Keep each line separate in the exam so you pick up method marks.
Market value rule: Gift or sale to a connected person (or not at arm's length): proceeds = market value at date of disposal; Use market value even if the person paid less, or nothing.
Cost of an asset received by gift: Cost = market value at the date of the gift; This is the recipient's base cost when they later sell.
Taxable gain after the annual exempt amount: Net gains − current year and brought forward losses − annual exempt amount (£3,000); Exempt amount is given in the tax rates and allowances. Rates are 18% and 24%.
Order of set-off: Gains − current year losses − brought forward losses (only as needed) − annual exempt amount = taxable gains; Current year losses come first and are set off in full. Brought forward losses are used only down to the annual exempt amount.
Annual exempt amount: £3,000 for individuals; Given in the ACCA rates and allowances. Unused annual exempt amount cannot be carried forward.
Brought forward loss used: Loss used = net gains after current year losses − £3,000 (limited to the loss available); If net gains are £3,000 or less, no brought forward loss is used.
CGT rates for individuals: 18% (lower rate) and 24% (higher rate); The rate depends on how much of the basic rate band is left after taxable income. Business asset disposal relief gains are taxed at 14%.
Current year net loss: If current year losses > current year gains, the excess is carried forward in full; The annual exempt amount is wasted in that year.
Taxable gains: Net gains = Total gains − current-year losses. Taxable gains = Net gains − annual exempt amount (£3,000) − brought-forward losses used; Current-year losses come off first. The annual exempt amount is then set against the net gains. Brought-forward losses are used only against the gains left after that, so they never waste the exempt amount. The exempt amount is not carried forward if unused.
Unused basic rate band: Unused band = £37,700 − taxable income; Use taxable income, after the personal allowance. If taxable income is £37,700 or more, no band remains. Extended bands (for example Gift Aid) increase the band.
CGT rates: Lower rate 18% | Higher rate 24%; 18% applies to gains within the unused basic rate band. 24% applies to the rest.
Relief rate: Business asset disposal relief and investors' relief: 14%; Lifetime limit £1,000,000 for each relief. Gains above the limit are taxed at 18% or 24%.
Order of using the annual exempt amount: Set the annual exempt amount against gains taxed at the highest rate first; This saves the most tax. In an exam, apply it to the 24% gains first, then 18%, then 14%.
Relieved gains and the band: Gains taxed at 14% use the basic rate band first; Remaining band is then available for 18% gains. Anything above is at 24%. The exempt amount does not change this order. It is simply set against the highest-rate gain.
Normal CGT payment date: 31 January following the end of the tax year of disposal; Applies to shares, land that is not UK residential property, and other assets. A 2026/27 gain is due 31 January 2028.
UK residential property: Report and pay within 60 days of completion; Applies where CGT is payable. Count 60 calendar days from the completion date.
Self-assessment filing dates: Paper return: 31 October after the tax year. Online return: 31 January after the tax year; For 2026/27 these are 31 October 2027 and 31 January 2028.
CGT rates and exempt amount (given in exam): 18% and 24%; annual exempt amount £3,000; Use 18% only on the part of the gain that falls within the unused basic rate band. The rest is at 24%.
Unused basic rate band: £37,700 − taxable income (if positive); Taxable income is after the personal allowance. Gains are taxed after income.
Spouse or civil partner transfer: Deemed proceeds = giver's cost (no gain, no loss); Applies only if the couple are living together in the tax year of transfer. The receiver inherits the giver's base cost and acquisition date.
Connected person disposal: Proceeds = market value of the asset; Used instead of the actual price for sales or gifts to connected persons. The acquirer's cost is also market value.
Connected person loss restriction: Loss relieved only against gains on disposals to the same connected person; Unused loss is carried forward for later gains on disposals to that person. It is not deducted from other gains.
CGT rates: 18% within unused basic rate band; 24% above it; Basic rate band is £37,700. Use the taxable income first, then the gain. The annual exempt amount is £3,000.
Gain after annual exempt amount: Taxable gain = chargeable gains − losses − £3,000 AEA; Each spouse has their own AEA. An unused AEA cannot be transferred to the other spouse.

Quick revision

CGT is charged on chargeable gains made by individuals on chargeable disposals of chargeable assets.
Gain = disposal proceeds less incidental disposal costs less allowable cost (including enhancement expenditure).
The annual exempt amount is £3,000.
CGT rates for individuals are 18% and 24%. The lower rate applies to gains within the unused basic rate band, which is £37,700 less taxable income.
Current-year losses must be set off against current-year gains in full, even if this wastes the annual exempt amount.
Brought-forward losses are used only to reduce gains to the annual exempt amount, so none of it is wasted.
Losses are not carried back, and the annual exempt amount cannot be carried forward.
Transfers between spouses and civil partners living together are on a no gain/no loss basis.
Disposals to connected persons are deemed to be at market value. Losses on such disposals can be set only against gains on other disposals to the same person.
Business asset disposal relief is taxed at 14%, with a lifetime limit of £1,000,000.
Companies do not pay CGT. Their gains are included in profits for corporation tax.
Check the exact payment and filing dates in your study text, and learn them as a pair.

Common mistakes

Saying a gift is not a disposal because no money was received. Fix: Treat a gift as a disposal at market value, unless a special rule applies. A gift to a spouse or civil partner living together is at no gain, no loss. A gift of a chargeable asset to a charity is treated as made for proceeds equal to cost, so no gain or loss arises.
Treating death as a chargeable disposal. Fix: There is no CGT on death. The beneficiary acquires the asset at its market value at the date of death. Inheritance tax may apply instead.
Using the actual price when the asset was gifted or sold to a connected person for less than market value. Fix: Check who the buyer is first. If it is a gift or a connected person, use market value.
Deducting repairs, maintenance or insurance as enhancement expenditure. Fix: Only deduct spending that adds to the asset and is still reflected in it on sale. Repairs are not.
Setting the brought forward loss against gains before the current year loss. Fix: Always deduct current year losses first. Only then look at brought forward losses.
Deducting the annual exempt amount before current year losses. Fix: Current year losses go first, then brought forward losses only as needed, then the annual exempt amount.
Using total income instead of taxable income to find the unused basic rate band. Fix: Always deduct the personal allowance from income before subtracting from £37,700.
Adding the gain to income and taxing it at income tax rates. Fix: Keep the two taxes separate. Income tax is computed on income. CGT is computed on gains using the unused band.
Using the exchange date for the 60-day count on a property sale. Fix: The date of disposal for the 60-day deadline is the completion date. Always check the completion date in the question.
Applying the 60-day rule to shares or commercial property. Fix: It applies only to UK residential property. Other gains are paid by 31 January after the tax year.

Exam tips

In objective tests, an option may be partly right. Check each part, as no partial marks are given.
Learn the exempt list as a short phrase: cars, gilts, qualifying corporate bonds, ISAs, wasting chattels, and chattels with cost and proceeds both £6,000 or less.
In a Section C answer, write one line on each of person, disposal and asset before computing. Examiners reward clear conclusions.
Use the residence table given in the exam. Do not learn it blindly; practise reading it by days, ties and previous residence.
Remember that gifts are at market value, except gifts to a spouse or civil partner living together (no gain, no loss) and gifts of chargeable assets to a charity (proceeds equal to cost, so no gain or loss). Keep these as two separate rules. If the question gives a market value for any other gift, use it and not the cost.
In Section C, show each line of the proforma separately. Marks are given for proceeds, each cost and the final gain.
Objective test questions on this topic are all or nothing. Check whether the buyer is connected or whether the asset was a gift before you calculate.
Mark every cost in the scenario as allowable or not. Repairs, insurance and loan interest are common traps.