ACCA Applied Skills · Taxation (UK)
The Computation of Capital Gains Tax for ACCA TX-UK
Capital gains tax is charged on an individual's chargeable gains from disposing of chargeable assets. Work out each gain as proceeds less allowable costs, deduct losses, then deduct the annual exempt amount of £3,000. Tax the rest at 18% or 24%, or 14% where business asset disposal relief applies.
What this chapter covers
This chapter teaches you the full capital gains tax (CGT) computation for individuals. You start with who is chargeable, which assets count and what a disposal is. You then calculate each gain, apply losses and the annual exempt amount, and finish with the rate, the due date and the reliefs.
The core layout never changes. Disposal proceeds, less allowable cost (including enhancement expenditure and incidental costs), gives the gain. Current-year losses come off first. Then the annual exempt amount of £3,000 comes off. The result is taxed at 18% to the extent that taxable income plus the gain falls within the £37,700 basic rate band, and at 24% above it. Example: a gain of £20,000 less £3,000 leaves £17,000. If the whole amount falls in the unused basic rate band, the tax is £17,000 × 18% = £3,060.
This chapter links to income tax, because you need taxable income to know how much basic rate band is left. It also feeds later topics: chargeable gains on shares, the main residence and chattels, inheritance tax and the gifts that cross over, and corporation tax, where companies pay on gains differently. Questions can appear as objective test items in Sections A and B, and as a gain computation inside a longer Section C question.
CGT is one of the most predictable parts of TX-UK. The method is mechanical, the rates and the annual exempt amount are given in the tax tables, and the same steps apply every time. That makes it a reliable place to win marks in objective tests, where a wrong answer scores zero, and in constructed response questions, where a clear layout earns marks even if one figure is wrong. Get this chapter secure and you also make later chapters on shares, reliefs and tax planning much easier.
The computation of capital gains tax: topics in the order to study them
- 1Chargeable Persons, Assets and DisposalsYou must know who pays CGT, which assets are exempt and what counts as a disposal before any calculation makes sense.
- 2Calculating a Chargeable GainThis is the core proceeds-less-cost layout that every other topic builds on, so learn it before adding losses or rates.
- 3Annual Exempt Amount and LossesOnce you can compute a gain, you learn the order for setting off losses and the £3,000 annual exempt amount.
- 4CGT Rates and Payment DatesRates need a taxable gain, and the 18% or 24% split depends on your income tax work, so this comes after the gain is fixed.
- 5Business Asset Disposal Relief and Investors' ReliefThese reliefs change the rate to 14% on qualifying gains up to a £1,000,000 lifetime limit, so you need the standard rates first.
- 6Capital Gains Tax Planning and Spouse TransfersPlanning ties everything together: use of annual exempt amounts, losses, rates and no gain/no loss transfers between spouses.
How to prepare The computation of capital gains tax
Treat this chapter as one fixed method that you practise until it is automatic, then add the exceptions.
- Learn the standard layout: proceeds, less incidental selling costs, less cost, less enhancement expenditure, equals gain. Write it from memory until it is automatic.
- Memorise the list of exempt assets and the basic disposal rules, such as gifts being treated as disposals at market value in the cases you are taught.
- Practise losses in the right order. Current-year losses are set off in full first. Brought-forward losses are used only to reduce gains down to the annual exempt amount.
- Drill the rate calculation. Find taxable income first, work out the unused basic rate band, then tax the gain at 18% within it and 24% above it.
- Learn business asset disposal relief as a separate block: the 14% rate, the £1,000,000 lifetime limit, and the qualifying conditions as taught in your notes.
- Do timed objective test questions on each topic, then at least two full Section C style gain computations with a clear, labelled layout.
- Finish with planning questions. Practise spreading gains and assets between spouses so that both annual exempt amounts and lower rate bands are used.
Common mistakes in The computation of capital gains tax
Taxing the whole gain at 24% or at 18% without checking taxable income.
Fix: Always compute taxable income first, find the unused basic rate band of £37,700, then split the taxable gain between 18% and 24%.
Deducting the annual exempt amount before current-year losses.
Fix: Net the current-year losses against the gains first, then deduct the £3,000 annual exempt amount from what remains.
Using brought-forward losses to wipe out the whole gain.
Fix: Use brought-forward losses only to reduce the gain to the annual exempt amount, so that amount is not wasted.
Leaving out allowable costs such as enhancement expenditure and incidental costs.
Fix: Read the scenario for every cost item and check whether it is of the allowable type before you leave it out.
Applying business asset disposal relief to the wrong gains or ignoring the lifetime limit.
Fix: Check the qualifying conditions first, then apply 14% only to the qualifying gain up to the £1,000,000 lifetime limit.
Treating spouse transfers as normal disposals at market value.
Fix: For spouses or civil partners living together, use no gain, no loss. The receiving spouse takes over the transferor's original cost.
Last-day revision: The computation of capital gains tax
- 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.
The computation of capital gains tax practice questions
- In the tax year 2025/26 Dev, a higher rate taxpayer, made one chargeable gain of £21,000 on quoted shares and had no capital losses. He made…
- In 2025/26 Sven, an additional rate taxpayer, made a chargeable gain of £2,500 and an allowable capital loss of £4,000 in the same tax year.…
- In 2025/26 Zara, a higher rate taxpayer, made a chargeable gain of £11,000 on quoted shares and no other disposals. She has capital losses o…
- In 2025/26 Omar made a chargeable gain of £5,000 and no losses in the year. He has capital losses of £7,000 brought forward. The annual exem…
- In 2026/27 Amara, an additional-rate taxpayer, makes a single chargeable gain of £10,000 on a disposal of shares. She has no capital losses.…
- In 2025/26 Nadia, a higher rate taxpayer, made chargeable gains of £20,000 and allowable losses of £6,000 on disposals in the same tax year.…
- In 2025/26 Yusuf, a higher rate taxpayer, made chargeable gains of £16,000 and allowable capital losses of £7,000 on separate disposals of q…
- Priya sold a painting in November 2025 for £48,000, paying auctioneer's fees of £2,000 on the sale. She had bought it in 2019 for £30,000 an…
The computation of capital gains tax in other exams
The same ground in other exams, if you are preparing for more than one or want another angle on it.
The computation of capital gains tax: frequently asked questions
What are the CGT rates for individuals in TX-UK?
The rates are 18% and 24%. The 18% rate applies to the extent that taxable income plus the gain falls within the £37,700 basic rate band, and 24% applies above it. Gains qualifying for business asset disposal relief or investors' relief are taxed at 14%.
What is the CGT annual exempt amount?
The annual exempt amount is £3,000. You deduct it from the net chargeable gains after current-year losses. It cannot be carried forward if unused, so planning often aims to use it each year.
In what order do I deduct losses and the annual exempt amount?
Deduct current-year losses from current-year gains first, even if this reduces the gains below the annual exempt amount. Then deduct brought-forward losses, but only as far as needed to bring the gain down to the annual exempt amount. The exempt amount is then deducted from what remains.
How do spouse transfers help with CGT planning?
Transfers between spouses or civil partners living together are on a no gain, no loss basis. This lets a couple move an asset to the spouse who has an unused annual exempt amount, unused losses or a lower rate band. Each spouse can then use their own reliefs and the 18% rate before the 24% rate applies.