Capital gains tax: gains and losses on the disposal of movable and immovable property: formula sheet

Key formulas

Basic gain

Chargeable gain = Disposal proceeds − Incidental costs of sale − Acquisition cost − Enhancement expenditure

Use market value instead of proceeds for gifts and connected-party sales.

Annual exempt amount

Annual exempt amount = £3,000

Deducted from net gains after current-year losses. It cannot be carried forward if unused.

Order of loss relief

Net gains = Current-year gains − Current-year losses; then deduct brought-forward losses only down to £3,000

Current-year losses are set off in full. Brought-forward losses are used only as needed. The balance carries forward.

Rates of CGT

18% within unused basic rate band (£37,700 less taxable income); 24% on the rest

Taxable income is used first. Business asset disposal relief gains are at 14% up to a £1,000,000 lifetime limit.

Rate band test

Unused band = £37,700 − Taxable income (not below nil)

Taxable income is after the personal allowance. If income already exceeds £37,700, all gains are at 24%.

Chattel exemption

Exempt if proceeds ≤ £6,000

The exemption limit is £6,000 of proceeds, whatever the cost. This is the usual chattel rule for gains. It is not shown in the tax tables, so learn it.

Chattel marginal relief

Maximum gain = 5/3 × (proceeds − £6,000)

Where proceeds exceed £6,000, the chargeable gain is the lower of this figure and the normal gain.

Chattel loss restriction

Loss computed using deemed proceeds of £6,000 if actual proceeds are less than £6,000

Where cost exceeds £6,000, the loss is restricted this way. If cost is £6,000 or less and proceeds are £6,000 or less, there is no allowable loss.

Wasting chattel

Predictable life of 50 years or less = exempt, unless used in a business and capital allowances were or could be claimed

Exempt means no gain and no allowable loss. If the asset is used in a business and capital allowances were or could have been claimed, it is not exempt. Apply the normal chattel rules (£6,000 limit and marginal relief) instead.

Part disposal cost

Allowable cost = total cost × A ÷ (A + B)

A = proceeds of the part sold. B = market value of the part kept at the date of disposal.

CGT rates and annual exempt amount

18% and 24%; annual exempt amount £3,000

Taken from the tax tables provided in the exam. Apply the rate that fits the taxpayer's taxable income and gains.

BADR rate and lifetime limit

Qualifying gain taxed at 14%, up to £1,000,000 of lifetime gains

Both figures come from the tax tables. Gains above the remaining limit fall back to 18% or 24%.

Investors' relief rate and limit

Qualifying gain taxed at 14%, up to a separate £1,000,000 lifetime limit

This limit is separate from the BADR limit. Using one does not use up the other.

Remaining lifetime limit

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

The limit is cumulative across all disposals, not per tax year.

BADR holding period

Two years up to the disposal date (or up to the cessation date if the disposal is within three years of cessation)

Applies to the business, or to the personal company conditions, whichever is being sold.

Personal company test

At least 5% of ordinary share capital and 5% of voting rights, plus officer or employee status

You must also be entitled to at least 5% of profits and 5% of assets or sale proceeds.

Investors' relief holding period

New unlisted shares, subscribed for in cash, held three years from issue

You must not be an employee or paid officer of the company.

Using the annual exempt amount

Annual exempt amount £3,000, set against gains taxed at the highest rate first

This saves the most tax. Set it against 24% gains before 18% gains, and 18% gains before 14% gains.

BADR gains and the basic rate band

BADR gains use the basic rate band before other gains

This can push other gains in the same year into the 24% rate.

Gift relief: gift of a qualifying asset

Gain held over = market value − cost (with any other reliefs and adjustments); donee base cost = market value − gain held over

The donor has no gain after a joint election. The donee's base cost is therefore the donor's original cost.

Gift relief: sale at undervalue

Gain taxed now = actual proceeds − cost (if positive); gain held over = (market value − cost) − gain taxed now

The donee's base cost = market value − gain held over. It equals the price paid in the simple case where proceeds exceed cost.

Rollover relief: partial reinvestment

Gain taxed now = lower of (gain) and (proceeds − amount reinvested); gain deferred = gain − gain taxed now

New asset base cost = cost of new asset − gain deferred. Reinvestment window: 12 months before to 36 months after disposal.

Rollover relief: depreciating assets

Deferred gain crystallises on the earliest of: sale of the replacement asset, it ceasing to be used in the trade, or 10 years after acquisition

Depreciating assets include fixed plant and machinery and assets with a life of 60 years or less. The base cost of the new asset is not reduced.

Incorporation relief: shares and other consideration

Gain deferred = total gain × (value of shares ÷ total consideration); base cost of shares = value of shares − gain deferred

The balance of the gain is chargeable now. Business asset disposal relief may apply to it if the conditions are met.

CGT rates and allowances (tax tables)

18% and 24%; annual exempt amount £3,000; business asset disposal relief rate 14% (lifetime limit £1,000,000)

Take these from the tax tables in the exam. Do not rely on memory.

Order of matching for individuals

1) Same day 2) Next 30 days (earliest first) 3) Section 104 pool

The 30-day match applies to shares bought after the sale. Gain or loss on a matched acquisition uses that acquisition's actual cost.

Section 104 pool cost on part disposal

Cost allowed = Total pool cost × (Shares sold ÷ Shares in pool)

Use the pool after any bonus and rights issue and after earlier acquisitions. Carry forward the remaining shares and cost.

Bonus issue

New shares added to pool; cost added = ₹0 (£0)

Total cost is unchanged. Cost per share falls.

Rights issue

Pool shares + new shares; pool cost + (new shares × issue price)

Treat as a purchase added to the pool at the date of the original holding.

Part cash, part shares takeover

Cost allowed = Total cost × A ÷ (A + B)

A = cash received, B = market value of new shares at the date of the takeover. The gain is proceeds A less this cost.

CGT rates and annual exempt amount (2025/26)

18% lower rate, 24% higher rate, annual exempt amount £3,000

Use the tax tables given in the exam. The rate depends on how much of the basic rate band is left after taxable income.

PRR fraction

PRR = Gain × (Exempt months ÷ Total months of ownership)

Total months run from acquisition to disposal. Apportion to the nearest month, as the exam instructions say.

Exempt months

Actual occupation + deemed occupation + final 9 months

Do not count the final 9 months twice if they overlap with actual or deemed occupation.

Final period exemption

Last 9 months of ownership always exempt (36 months for disabled persons and care home residents meeting the conditions)

It applies if the property was the main residence at some point.

Deemed occupation periods

Any reason: up to 3 years in total. Employed outside the UK: any length. Employed elsewhere in the UK: up to 4 years.

You must have lived in the property before and after the absence. The 'after' test is waived if your work stopped you returning. The periods are not consecutive tests.

Letting relief

Lowest of: £40,000; PRR amount; gain attributable to letting

Only where the owner shared occupation with the tenant. Not available for whole-property lets.

CGT rates and AEA

Annual exempt amount £3,000; 18% within unused basic rate band; 24% above

Rates for 2025/26 as given in the tax tables. The question gives the income needed.

60-day rule

Return and payment on account due within 60 days after completion of a UK residential property disposal with CGT payable

Completion date, not contract date, starts the clock for the sale.

SDLT on non-residential property

0% × first £150,000 + 2% × (£150,001 to £250,000) + 5% × excess over £250,000

Slice basis. Paid by the buyer. Apply each rate only to its own slice, never to the whole price.

Stamp duty on shares

0.5% × consideration, rounded up to the nearest £5

Paid by the buyer. No duty on a gift with no consideration.

CGT cost of property

Purchase price + SDLT + legal fees + enhancement costs

SDLT is a capital cost. It gets no income tax or corporation tax deduction.

Capital allowance rates

Main pool 18%; special rate pool 6%; AIA 100% up to £1,000,000; SBA 3% straight line

Companies: first year allowance 100% main pool, 50% special rate pool. Buildings and land do not qualify.

CGT rates

18% (basic rate band) and 24% (above); annual exempt amount £3,000

BADR rate is 14%, with a £1,000,000 lifetime limit.

Gift holdover relief

Gain held over = chargeable gain (or the relevant part). Donee's base cost = market value − gain held over

Business assets, or any asset if the gift is immediately chargeable to IHT (a CLT).

IHT rates

Lifetime 20% and death 40% on the excess over the £325,000 nil rate band

Residence nil rate band is £175,000. It applies on death only, where a home passes to direct descendants.

Taper relief on the tax

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

It reduces the death tax, not the value of the gift. No relief if the death is within three years.

Quick revision

• CGT rates in the tables are 18% (lower) and 24% (higher), and the annual exempt amount is £3,000.
• Gain = proceeds less allowable cost and costs of disposal, and then less losses and the annual exempt amount.
• Business asset disposal relief and investors' relief both have a £1,000,000 lifetime limit, and the rate on qualifying gains is 14%.
• Gift holdover relief and rollover relief defer a gain, and they work by adjusting the base cost of the new or gifted asset.
• Incorporation relief defers the gain on transfer of a business to a company, and it reduces the base cost of the shares.
• Share disposals are matched in order: same day, then the next 30 days, then the share pool.
• Check the conditions for every relief before you apply it, and state them in your answer.
• Private residence relief depends on periods of occupation and deemed occupation, so check the facts for each period.
• Capital allowances affect the cost and tax position of property, so check them when a building or plant is sold.
• Stamp duty on shares is 0.5%, and stamp duty land tax on non-residential property is 0%, 2% and 5% by band.
• Inheritance tax can apply to a gift as well as CGT, so consider both when a gift is made.
• Show all workings and state your assumptions clearly.

Common mistakes

• Using the annual exempt amount before current-year losses. Fix: Net current-year losses against gains first. Then deduct brought-forward losses only as needed. The £3,000 comes last.
• Using brought-forward losses to cut gains to nil. Fix: Use brought-forward losses only to reduce net gains to £3,000, so the exempt amount is not wasted.
• Treating the £6,000 exemption as a deduction from the gain Fix: It is a limit on proceeds. Above £6,000 you either use the normal gain or the 5/3 cap, whichever is lower.
• Using 5/3 × (gain − £6,000) instead of proceeds Fix: Always start with proceeds. The formula is 5/3 × (proceeds − £6,000).
• Applying BADR without checking the two-year period or the 5% personal company test. Fix: Tick off every condition in writing before you calculate. If a fact is missing, say what you assume.
• Treating the £1,000,000 limit as annual. Fix: Remember the limit is for a lifetime. Always deduct earlier qualifying gains first.
• Using sale proceeds rather than market value when computing the gain on a gift or sale at undervalue. Fix: Use market value as deemed proceeds, then split the gain into the part taxed now and the part held over.
• Deferring the whole gain on rollover relief when only part of the proceeds is reinvested. Fix: Compare the gain with the proceeds not reinvested. Tax now is the lower of the two.
• Putting all acquisitions into the pool and ignoring the 30-day rule Fix: Always check for purchases within 30 days after the sale before building the pool. Those shares come out of the pool and are matched first.
• Adding bonus shares at a cost Fix: Add the shares to the number column and add £0 to the cost column.

Exam tips

• Show the loss ordering clearly. Marks are given for setting current-year losses first and limiting brought-forward losses to what is needed.
• Always compute the unused basic rate band from taxable income. Show the £37,700 figure and the subtraction.
• Take rates and the £3,000 exempt amount from the tax tables provided. Do not rely on memory of earlier years.
• Round to the nearest £ and show all workings, as the supplementary instructions require.
• Write the loss carried forward at the end of the computation, even if it is nil.
• Write the 5/3 working out in full. Marks are given for the cap even if you later make an error.
• In part disposal questions, label A and B clearly. Examiners often give several values, so choose carefully.
• State why an asset is exempt, for example wasting chattel with a life of 50 years or less. A short reason earns the mark.