Capital gains tax and trusts: formula sheet

Key formulas

Gain on disposal

Gain = proceeds (or market value) − incidental selling costs − cost − incidental acquisition costs − enhancement expenditure

Use market value for gifts and for sales to connected persons. Show each figure separately in your working.

Taxable gain

Taxable gain = total gains − current year losses (deducted in full) − brought forward losses (only down to the annual exempt amount) − annual exempt amount

The annual exempt amount is £3,000. It cannot be carried forward or back if unused. Current year losses cannot be restricted. Only brought forward losses are used just as needed. Where some gains are taxed at 14%, set the annual exempt amount against the gains taxed at the highest rates first.

Main CGT rates

18% (lower rate) and 24% (higher rate)

18% applies to gains within the unused basic rate band. 24% applies to the rest.

Unused basic rate band

Unused band = £37,700 − taxable income (after personal allowance and deductions)

If taxable income is £37,700 or more, no band is left and all gains are taxed at 24%. Gross pension contributions and Gift Aid donations extend the band.

Business asset disposal relief and investors' relief

Rate 14%; lifetime limit £1,000,000 for each relief

Qualifying gains are taxed first at 14% and use the basic rate band first, so the band left for other gains is reduced (not below nil). The annual exempt amount goes against gains taxed at the highest rates first. Qualification conditions are covered in a separate topic.

Cap on income tax reliefs

Cap = higher of £50,000 or 25% of income

This applies unless a relief is otherwise restricted. It can limit reliefs that reduce income, which affects the band left for gains.

Personal allowance

£12,570, reduced to zero where adjusted net income is £125,140 or more

Used to find taxable income before stacking gains on top.

Reduced rate on qualifying gains

BADR or IR gain up to the remaining limit × 14%

Rate and limits are in the CGT table of the tax tables ACCA gives you. Use the rate the question gives if it differs.

Lifetime limit

Remaining limit = £1,000,000 − gains on which relief was claimed earlier

BADR and investors' relief each have their own £1,000,000 limit. They are not shared.

Excess over the limit

Qualifying gain − remaining limit = gain taxed at 18% or 24%

Use 24% if the individual's taxable income already fills the basic rate band, or if the excess goes beyond the unused basic rate band.

Annual exempt amount

Annual exempt amount = £3,000

Set it against the gains taxed at the highest rate first, since that saves the most tax.

BADR holding period

At least 2 years of ownership before disposal or cessation

For a ceased business, the assets must be sold within 3 years of cessation.

Personal company test

≥ 5% ordinary shares and ≥ 5% voting rights, plus officer or employee

The 5% holdings also need the matching entitlement to profits and assets (or sale proceeds). Test throughout the two years before disposal.

Investors' relief holding period

New shares for cash, unlisted company, held 3 years from issue

Shares must be newly subscribed. Bought-from-another-shareholder shares do not qualify.

Gain before relief

Gain = disposal value (market value for a gift) − allowable cost

Use market value for a gift or a connected-party sale. Use actual proceeds for an arm's length sale.

Gift holdover: gain held over (full gift)

Held-over gain = full gain. For shares: full gain × chargeable business assets ÷ total chargeable assets of the company

For a gift of business assets other than shares, the donor's gain becomes nil. For shares, any part of the gain not held over because of chargeable non-business assets is chargeable now. The relief is claimed jointly by donor and donee, except for gifts into trust, where the donor alone claims. The claim deadline is four years after the end of the tax year of the disposal.

Gift holdover: sale at undervalue

Chargeable gain now = excess of actual proceeds over allowable cost, capped at the total gain. Held-over gain = total gain − chargeable gain now

If the proceeds are not above cost, the whole gain is held over.

Donee's base cost

Donee's base cost = market value at gift − held-over gain

This is the trap. The deferred gain is deducted from the donee's cost, so a larger gain is taxed when the donee sells.

Rollover: gain taxed now (part reinvestment)

Chargeable now = proceeds not reinvested (limited to the gain)

Proceeds not reinvested = disposal proceeds − cost of new asset.

Rollover: gain rolled over and new base cost

Rolled-over gain = total gain − chargeable now. New base cost = cost of new asset − rolled-over gain

This applies to non-depreciating assets such as land and buildings.

Rollover time limit

New asset bought from 1 year before to 3 years after the disposal

Both assets must be used in the claimant's trade.

Depreciating asset rule

A depreciating asset has a predicted life of 60 years or less (fixed plant and machinery is included). The gain is frozen until the earliest of: sale of the new asset, it ceasing to be used in the trade, or 10 years after acquisition

The new asset's base cost is not reduced.

Rates from the tax tables

CGT 18% (lower rate) and 24% (higher rate); annual exempt amount £3,000; BADR 14%; AIA 100% up to £1,000,000

The tables are given in the exam. Learn where they are, but still do the working.

Matching order for individuals

1. Same day → 2. Next 30 days → 3. Section 104 pool

Apply the order to each disposal. Within the 30-day rule, match the earliest acquisition first.

Cost of shares sold from the pool

Allowable cost = Pool cost × Shares sold ÷ Shares in pool

Use the pool as it stands at the disposal date, after any bonus or rights issue and after matched shares are removed.

Gain on a share disposal

Gain = Proceeds − Allowable cost (matched separately for each matching group)

Compute a separate gain for each group (same day, 30 day, pool), then add them up.

Bonus issue

New pool shares = old shares + bonus shares; pool cost unchanged

Only the number of shares in the pool changes.

Rights issue

New pool shares = old shares + rights shares; new pool cost = old cost + cash paid

Treated as part of the original holding, so it does not fall into the same day or 30-day rules.

Part-cash share-for-share exchange

Cost allocated to cash = Total cost × A ÷ (A + B)

A = cash received, B = market value of new shares at the exchange. The cash portion is a part disposal, and the rest of the cost carries to the new shares.

CGT rates and exempt amount (2025/26)

18% or 24%; annual exempt amount £3,000; BADR and investors' relief 14%

The rate depends on the taxpayer's remaining basic rate band. The rates are given in the tax tables.

Trust income tax rates (discretionary)

Non-dividend 45%; dividends 39.35%

These are the additional rates in the tax tables. The trust's standard rate band is taxed at lower rates. Learn its amount separately.

IIP trust income tax rates

Non-dividend 20%; dividends 8.75%

Trustees pay these rates. The beneficiary then gets credit for tax paid and is taxed at their own rates.

Nil rate band and lifetime rate

NRB £325,000; lifetime rate 20%; death rate 40%

Reduce NRB by the settlor's CLTs in the seven years before the transfer.

Entry charge

20% × (CLT − available NRB)

If the settlor pays the tax, gross up the net excess by 20/80.

Taper relief on death

3-4 yrs 20%; 4-5 yrs 40%; 5-6 yrs 60%; 6-7 yrs 80% reduction

Applies to the death tax (40%), not to the value of the transfer. Credit lifetime tax paid.

Periodic charge

Value of trust × 30% × (tax on hypothetical transfer ÷ hypothetical transfer)

Maximum effective rate is 6%. Hypothetical transfer is the trust value plus any related property in the trust, using lifetime rates.

Exit charge after a ten-year anniversary

Value leaving × rate at last anniversary × complete quarters ÷ 40

Complete quarters since the last anniversary. No charge in the first three months.

Interest on tax

Underpaid 8.50%; overpaid 3.50%

These are the assumed rates in the tax tables. Interest on underpaid tax runs from the due date.

Quick revision

• CGT rates for individuals are 18% (lower) and 24% (higher), and the annual exempt amount is £3,000.
• Business asset disposal relief and investors' relief both have a £1,000,000 lifetime limit and a 14% rate.
• Gift holdover relief defers the gain by reducing the recipient's base cost.
• Rollover relief defers a gain by reducing the base cost of the replacement asset.
• Share matching: apply the matching rules in the correct order before computing any gain.
• Stamp duty on shares is 0.5%, and non-residential SDLT is 0% to £150,000, 2% to £250,000 and 5% above.
• Capital allowances rates include 18% main pool, 6% special rate pool and 3% structures and buildings allowance.
• Inheritance tax: nil rate band £325,000, residence nil rate band £175,000, lifetime rate 20%, death rate 40%.
• Taper relief on death applies only to gifts made more than three years before death.
• Trustees and beneficiaries are taxed differently, so state who bears each tax.
• Show workings to the nearest £ and apportion to the nearest month, as the exam instructions require.

Common mistakes

• Taxing the whole gain at 24% without checking the basic rate band. Fix: Always compute taxable income first and find the unused part of the £37,700 band before applying any rate.
• Using the personal allowance against gains. Fix: The personal allowance reduces income only. Only the £3,000 annual exempt amount reduces gains. If income is below the allowance, the unused allowance is lost and does not shelter gains.
• Treating a sale of a single business asset as qualifying for BADR while the business continues. Fix: Check the type of disposal. It must be the whole or part of a business, assets after cessation, or qualifying shares. A lone asset sold while the business continues does not qualify.
• Missing the 5% shareholding, officer or employee test, or the two-year period for shares. Fix: Tick every limb: 5% of ordinary shares, 5% of votes, officer or employee, and trading company, all throughout the two years before the sale.
• Giving the donee a base cost equal to market value after holdover relief. Fix: Always write: donee's base cost = market value − held-over gain. Check it by asking whether the deferred gain will come back in on the donee's later sale.
• Taxing the whole gain when only part of the proceeds is reinvested. Fix: Tax now only the proceeds not reinvested, capped at the gain. Roll the rest into the new asset's base cost.
• Adding shares bought within 30 days after a sale to the pool. Fix: Check the 30 days after each disposal first. Matched shares come out before the pool is used.
• Applying the same day and 30-day rules to rights issue shares. Fix: Treat rights shares as part of the original holding. Add the shares and the cash paid to the pool.
• Using the full £325,000 NRB without deducting earlier CLTs. Fix: List all CLTs in the previous seven years and deduct them before computing the excess.
• Not grossing up when the settlor pays the lifetime tax. Fix: Read who pays. If the settlor pays, tax the net excess at 20/80 and add it to the gift.

Exam tips

• Always start with income tax. Write taxable income and the unused basic rate band at the top of your answer, even if the question only mentions CGT.
• Copy rates from the tax tables in the exam. Do not rely on memory, and state the assumption that 2025/26 rates apply unless told otherwise.
• Look for planning hooks: pension contributions, Gift Aid, losses and business asset disposal relief. Each changes the band or the gain, and examiners reward using it.
• Show every figure and round each line to the nearest £. Method marks are lost when only a total appears.
• In advice parts, explain why the tax falls, in one clear sentence, to earn professional skills marks for communication.
• Write the conditions as a short checklist and tick each one against the scenario. The marks are for applying each test to the facts, not for reciting them.
• Scan the question for earlier relief claims and for the dates showing the holding period. Both are common traps.
• State clearly that BADR and investors' relief must be claimed, and note that you are assuming the claim is made.