Taxation (UK) · The basic principles of computing gains and losses

CGT Computation, Annual Exempt Amount and Rates for ACCA TX-UK

Updated 11 October 2026 · Fact-checked

Compute each gain, deduct allowable losses, then deduct the £3,000 annual exempt amount. Tax the rest at 18% to the extent it fits in the unused basic rate band (£37,700 less taxable income), and at 24% above that. Business asset disposal relief and investors' relief gains are taxed at 14%.

Understand CGT Computation, Annual Exempt Amount and Rates

Capital gains tax (CGT) is charged on the profit an individual makes when disposing of a chargeable asset. You first work out each gain or loss. This topic starts after that: how you turn total gains into a tax bill.

Every individual has an annual exempt amount. In the ACCA tax tables it is £3,000. It is deducted from net gains after current-year losses. If gains are lower than the amount, the unused part is wasted. It cannot be carried forward or back.

The tax rate depends on your income. Taxable gains are treated as the top slice of your income. There are two rates: 18% (lower) and 24% (higher). The 18% rate applies to the part of the taxable gain that fits within your unused basic rate band. The basic rate band is £37,700. The unused part is £37,700 less your taxable income. Any gain above that is taxed at 24%.

The income tax and CGT bands are the same size, but they are applied separately. Income tax uses the bands for income at 20%, 40% and 45%. CGT uses the same basic rate band as a measuring stick to decide between 18% and 24%. Taxable income means income after the personal allowance. Gains are never added into taxable income for income tax.

Some gains get a special rate. Gains qualifying for business asset disposal relief or investors' relief are taxed at 14%, up to a lifetime limit of £1,000,000 for each relief. These gains use up the basic rate band first. So they affect how much band is left for other gains.

Key rules to remember

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.

How to solve CGT Computation, Annual Exempt Amount and Rates questions

Follow this order for any CGT liability question. It works whether the question gives one disposal or several.

1Compute each gain or loss separately, using proceeds less allowable cost and expenses.
2Add up the gains and deduct current-year losses to get net gains. Do not use brought-forward losses yet.
3Set the annual exempt amount of £3,000 against the net gains. Use it against the gains taxed at the highest rate first. Then use any brought-forward losses against the gains that remain, but only up to that remaining amount. This way the exempt amount is never wasted by losses.
4Work out taxable income after the personal allowance. If the question gives only total income, deduct the personal allowance.
5Calculate the unused basic rate band: £37,700 less taxable income, never below nil. Add any extension for Gift Aid or pension contributions.
6Split the taxable gains. Gains qualifying for business asset disposal relief or investors' relief are taxed at 14% first, using the band. Other gains are taxed at 18% within the remaining band and 24% above it.
7Add the tax amounts together and state the total CGT liability. Show your working so method marks are available.

Quickest way: Band-and-slice shortcut

When to use it: Use this for OT questions where you only need the tax figure, with one type of gain and a simple income figure.

Taxable gain = gain − losses − £3,000, or nil if lower.
Band left = £37,700 − taxable income, or nil if income is higher.
If taxable gain ≤ band left, tax = gain × 18%.
If not, tax = band left × 18% + (gain − band left) × 24%.
If the gain qualifies for business asset disposal relief, tax = gain × 14% (within the limit). Check that the annual exempt amount was used.

Common mistakes in CGT Computation, Annual Exempt Amount and Rates

Using total income instead of taxable income to find the unused basic rate band.
Students forget that the personal allowance is deducted first.
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.
The band is shared, so it feels like one calculation.
Fix: Keep the two taxes separate. Income tax is computed on income. CGT is computed on gains using the unused band.
Deducting the annual exempt amount before current-year losses, or using brought-forward losses too early.
The exemption feels like the first step, and all losses look alike.
Fix: Net current-year losses against gains first. Then set the £3,000 against the net gains. Use brought-forward losses only against the gains left after that, so the exempt amount is not wasted.
Applying 14% to the gain after the £1,000,000 lifetime limit is used up.
Students forget earlier claims count towards the limit.
Fix: Check the limit remaining. Gains above it are taxed at 18% or 24%.
Setting the annual exempt amount against the 18% gain when 24% gains exist.
Gains are taken in the order they appear.
Fix: Use the exempt amount against gains taxed at the highest rate first, to minimise tax.
Using the old 10% rate for relieved gains.
Older notes show a different rate.
Fix: Use the 14% rate in the ACCA tax tables for this exam.

Worked examples

Example 1

Amara has taxable income of £30,000 for the tax year. She makes a chargeable gain of £20,000 on a quoted share disposal. She has no losses. Compute her CGT liability.

Show the solution

Gain £20,000 less annual exempt amount £3,000 = taxable gain £17,000.
Unused basic rate band = £37,700 − £30,000 = £7,700.
Gain at 18%: £7,700 × 18% = £1,386.
Gain at 24%: £17,000 − £7,700 = £9,300 × 24% = £2,232.
Total CGT = £1,386 + £2,232 = £3,618.

Answer: Amara's CGT liability is £3,618.

Example 2

Ben has taxable income of £20,000. He sells his business and makes a gain of £50,000 qualifying for business asset disposal relief. He also sells shares and makes a gain of £23,000 that does not qualify. He has made no earlier claims. Compute his CGT liability.

Show the solution

Total gains = £50,000 + £23,000 = £73,000.
Unused basic rate band = £37,700 − £20,000 = £17,700.
The relieved gain of £50,000 is taxed at 14% and uses the band first. It exceeds the band, so no band is left for the share gain. The share gain is therefore all taxed at 24%.
The shares are taxed at 24%, which is higher than 14%. So the annual exempt amount of £3,000 is set against the share gain: £23,000 − £3,000 = £20,000.
Relieved gain: £50,000 × 14% = £7,000. This is within the £1,000,000 limit.
Share gain: £20,000 × 24% = £4,800.
Total CGT = £7,000 + £4,800 = £11,800.

Answer: Ben's CGT liability is £11,800.

Exam tips

Write the band calculation clearly. Markers give marks for £37,700 less taxable income even if later arithmetic slips.
Check whether the question gives total income or taxable income. Deduct the personal allowance if it gives total income.
Use the tax tables provided in the exam. Do not rely on memory for rates, the £3,000 exempt amount or the £1,000,000 limit.
In OT questions, watch for a loss or an extended band hidden in the scenario. These change the figure.
For constructed response answers, lay out gains, exempt amount, band and tax in separate lines so each earns marks.

Practice questions from The basic principles of computing gains and losses

CGT Computation, Annual Exempt Amount and Rates in other exams

The same ground in other exams, if you are preparing for more than one or want another angle on it.

ACCA Strategic ProfessionalCGT Rates, Annual Exempt Amount and Computation Basics

CGT Computation, Annual Exempt Amount and Rates: frequently asked questions

What are the CGT rates in ACCA TX-UK?

The lower rate is 18% and the higher rate is 24%. Gains qualifying for business asset disposal relief or investors' relief are taxed at 14%. Use the rates in the tax tables for your exam.

What is the annual exempt amount for CGT?

It is £3,000 in the ACCA tax tables for this exam. It is deducted from net gains after current-year losses. Unused amounts cannot be carried forward.

How do I calculate CGT using taxable income?

Subtract taxable income from the £37,700 basic rate band to find the unused band. Taxable gains up to that amount are taxed at 18%. Any excess is taxed at 24%.

What is the difference between CGT and income tax bands?

Income tax applies bands of 20%, 40% and 45% to income. CGT uses the unused basic rate band only to decide between 18% and 24% on gains. Gains are not added to income for income tax.