ACCA Applied Skills · Taxation (UK)

The computation of capital gains tax: formula sheet

Full chapter guide

Key formulas

Conditions for a CGT charge: Chargeable person + chargeable disposal + chargeable asset = CGT charge; All three must be present. Exempt asset, exempt disposal or a non-chargeable person means no CGT.
Chargeable persons: Individuals, trustees, personal representatives (partners taxed as individuals); companies pay corporation tax instead; Residence of the individual decides whether worldwide gains are taxable.
Date of disposal: Unconditional contract: date of contract. Conditional contract: date condition met. Gift: date gift is completed; Not the date of completion or payment. Decides the tax year.
Gift or non-arm's length disposal: Proceeds = market value at date of disposal; Also applies to disposals to connected persons.
Spouse or civil partner transfer: Transfer at no gain, no loss (cost plus any indexation not applicable to individuals); Applies when living together in the tax year of transfer. The recipient takes over the original cost.
CGT rates and annual exempt amount: Rates 18% and 24%; annual exempt amount £3,000; BADR and investors' relief rate 14%; Figures from ACCA's tax rates and allowances for Finance Act 2025.
Chargeable gain proforma: Disposal proceeds − incidental costs of disposal = net proceeds; net proceeds − (original cost + incidental costs of acquisition + enhancement expenditure) = chargeable gain (or allowable loss); Lay it out as a column of figures with a line for each item. Marks are given for each line.
Market value rule for disposals: Gift or sale to a connected person or not at arm's length: proceeds = market value at the date of disposal; Use it even if the person paid less than market value or paid nothing. Incidental costs of disposal are still deducted.
Acquirer's cost on a gift or connected-party transfer: Recipient's base cost = market value at the date of the transfer; This is the figure the recipient uses when they later sell. Transfers between spouses or civil partners living together are the exception, and are treated as no gain, no loss.
Allowable enhancement expenditure: Capital spending reflected in the state or nature of the asset at disposal, plus costs of establishing, preserving or defending title; Repairs, maintenance, insurance and loan interest are not allowable.
CGT rates and annual exempt amount (provided in the exam): Lower rate 18%; higher rate 24%; annual exempt amount £3,000; These are applied after the gain is computed. Business asset disposal relief and investors' relief have a 14% rate and a lifetime limit of £1,000,000 each.
Annual exempt amount: AEA = £3,000 per individual per tax year; Use it or lose it. No carry forward. Not transferable between spouses.
Taxable gains: Taxable gains = Gains − current year losses − brought forward losses (only down to the AEA) − AEA; Never let taxable gains go below nil.
Current year losses: Set against current year gains in full; Applies even if it wastes the AEA. No choice.
Brought forward losses: Loss used = Net gains after current year losses − £3,000 (limited to loss available); Only used to the extent needed. The balance is carried forward indefinitely.
Losses in year of death: Set against gains in the year of death, then carried back three years, latest year first; Applies to unused losses of the year of death.
Rates on taxable gains: 18% within the basic rate band, 24% above it; 14% for gains qualifying for BADR or investors' relief; Use any unused basic rate band after taxable income. Apply AEA and losses to the highest-rate gains first.
CGT rates for individuals: Lower rate 18%; higher rate 24%; The 18% rate applies to gains within the unused basic rate band. The 24% rate applies to the rest.
Unused basic rate band: £37,700 − taxable income (not below nil); Taxable income is after the personal allowance. Extend the band for gross Gift Aid donations and personal pension contributions.
Annual exempt amount: £3,000; Deduct from total gains after current year losses. It is not a tax-free band.
Taxable gain: Gains − current year losses − brought forward losses (as needed) − annual exempt amount; Set this against the unused band to split between 18% and 24%.
BADR and investors' relief rate: 14% on qualifying gains; lifetime limit £1,000,000; This is a separate rate for qualifying gains only. Do not apply it to ordinary gains.
Due date: UK residential property: Return and payment within 60 days of completion; Applies where CGT is payable on a UK residential property disposal.
Due date: other gains: 31 January following the end of the tax year; Gains are reported on the self-assessment return. Example: 2026/27 gains are due by 31 January 2028.
Reduced rate: Qualifying gain (within lifetime limit) taxed at 14%; Same rate for BADR and investors' relief, from the ACCA tax rates and allowances.
Lifetime limit: BADR: £1,000,000; investors' relief: £1,000,000; Two separate limits. Deduct earlier relieved gains to find the limit remaining.
Gains above the limit: Excess taxed at 18% or 24% depending on the basic rate band remaining; The 14% gain uses the basic rate band (£37,700 less taxable income) first. Only any balance of the band is left for other gains at 18%. The rest of the other gains is taxed at 24%.
Normal CGT rates and annual exempt amount: 18% and 24%; annual exempt amount £3,000; Set the annual exempt amount against the gains taxed at the highest rate first.
BADR trading business: Owned for at least 2 years before disposal (or before cessation, if cessation was within 3 years); Applies to sole traders and partners.
BADR shares: Officer or employee, and at least 5% of ordinary shares and 5% of voting rights, for at least 2 years; The company must be a trading company, or the holding company of a trading group.
Investors' relief shares: New ordinary shares, unlisted trading company, subscribed for, held at least 3 years, investor not an officer or employee; Shares bought from another shareholder do not qualify.
Spouse transfer deemed proceeds: Deemed proceeds = original cost (plus enhancement expenditure) of transferor; Applies to spouses or civil partners living together in the tax year of transfer. Gain = nil, loss = nil.
Receiving spouse's base cost: Base cost = transferor's cost; acquisition date = transferor's date; The later sale by the receiver is then computed using this cost.
CGT annual exempt amount: £3,000 per individual per tax year; Not transferable and cannot be carried forward.
CGT rates: 18% within unused basic rate band; 24% above; Unused basic rate band = £37,700 − taxable income. Gains are treated as the top slice of income.
Taxable gain: Net chargeable gains − current year losses − brought forward losses (only as needed) − annual exempt amount; Current year losses are set off in full. Brought forward losses are used only to reduce gains to the annual exempt amount.
Business asset disposal relief: 14% on qualifying gains up to £1,000,000 lifetime limit; Available for qualifying disposals; each spouse has their own limit if qualifying conditions are met.

Quick revision

CGT applies to chargeable gains made by individuals on chargeable disposals of chargeable assets.
Gain = proceeds − incidental selling costs − cost − enhancement expenditure.
Rates for individuals are 18% (within the basic rate band) and 24% (above it).
The annual exempt amount is £3,000.
Gains are treated as the top slice of income, so taxable income uses the basic rate band first.
Set current-year losses against current-year gains first, even if that wastes the annual exempt amount.
Use brought-forward losses only to reduce gains to the annual exempt amount.
Business asset disposal relief and investors' relief are taxed at 14% up to a £1,000,000 lifetime limit each.
Transfers between spouses or civil partners living together are on a no gain, no loss basis.
Planning point: transfer assets between spouses so each uses the annual exempt amount and the basic rate band.
Layout counts in Section C: show each step on its own line and label it.

Common mistakes

Treating completion date as the disposal date. Fix: For a contract, use the date the contract is made. Completion only matters if there is no earlier contract.
Charging CGT on a company's gain. Fix: Companies are not chargeable persons for CGT. Their gains are chargeable to corporation tax.
Including repairs, redecoration or insurance as enhancement expenditure. Fix: Only capital spending that is still reflected in the asset at disposal counts. Repairs and maintenance only keep the asset as it is, so exclude them.
Using the actual price received when the asset was sold to a connected person at an undervalue. Fix: Check the relationship first. If the buyer is a connected person or the sale is not at arm's length, use market value as the proceeds.
Using brought forward losses to reduce gains to nil, so wasting the AEA. Fix: Only current year losses are used in full. Brought forward losses stop at £3,000 of net gains.
Using the AEA before deducting losses. Fix: The order is gains, then current year losses, then brought forward losses (to the AEA), then the AEA.
Using total income instead of taxable income to find the unused band. Fix: Always deduct the personal allowance. Use only the figure left after it when working out how much of £37,700 is used.
Applying 24% to all gains because the person is a higher rate taxpayer, or 18% to all because they are a basic rate taxpayer. Fix: Calculate the unused band every time. A gain can be split between 18% and 24%.
Applying 14% to gains above the £1,000,000 lifetime limit. Fix: Always ask whether earlier relieved gains exist. Tax only the remaining limit at 14% and the excess at 18% or 24%.
Giving BADR to a shareholder who is not an officer or employee. Fix: Tick all conditions: trading company, 5% of shares, 5% of votes, officer or employee, two years. If the person is a pure investor, consider investors' relief instead.

Exam tips

In objective tests, work through who, what, event and when before looking at the options.
Memorise the exempt list: cars, chattels of £6,000 or less, wasting chattels, gilts, QCBs, ISAs and NS&I.
Always state the date of disposal and tax year in a written answer, and write out the reason for each exemption.
Watch for a company in the scenario; the answer may be corporation tax rather than CGT.
Use market value for gifts, but remember spouse transfers are at no gain, no loss.
Always lay out the proforma, even in a constructed response question where only part of it is needed. Marks are given for each correct line, so a labelled layout protects you from losing all marks for one error.
Read the question for the relationship between buyer and seller. Words such as brother, sister, son, company controlled by or gift are signals to use market value.
In objective test questions, one option is often the answer you get by including a repair or using the sale price. Work through the proforma before you look at the options, because answers are all or nothing.