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ACCA Applied Skills · Taxation (UK)

The Scope of the Taxation of Capital Gains for ACCA TX-UK

The scope of capital gains tax decides who is taxed, on what, and when. A chargeable person makes a chargeable disposal of a chargeable asset. You then remove exempt items, compute the gain, deduct the annual exempt amount of £3,000 and apply 18% or 24%. Check scope first, every time.

What this chapter covers

This chapter sets the boundaries of capital gains tax (CGT) in TX-UK. Before you compute any gain, you must ask three questions. Is the person chargeable, which depends on UK residence? Is there a chargeable disposal? Is the asset a chargeable asset, or is it exempt?

The chapter then moves to the end of the process: rates, the annual exempt amount, reliefs, and how and when the tax is paid and reported. The rates and allowances come from the tax tables ACCA gives you in the exam. You do not need to memorise them, but you must know when each one applies.

This chapter links to much of the rest of the paper. The residence rules also matter for income tax. Business asset disposal relief links to the sole trader and partnership material. Companies pay corporation tax on their gains, not CGT, so you must keep the two regimes apart. Inheritance tax also uses disposals, so the idea of a disposal helps you there too.

CGT scope questions are a reliable source of marks, in both objective test questions and written questions. Scope questions are often short and rule-based. In an objective test they are marked all or nothing, so one missed condition costs the whole mark. A student who checks residence, disposal and asset type in order avoids most of these errors. The same checks also protect your marks in longer computations, where an exempt asset or a non-chargeable person means no gain to compute at all.

The scope of the taxation of capital gains: topics in the order to study them

  1. 1Chargeable Persons and Residence for Capital Gains TaxStart here because everything depends on who is taxed. The statutory residence test table is given in the exam, but you must apply it correctly.
  2. 2Chargeable Disposals and Chargeable AssetsOnce you know the person is chargeable, you need to know what counts as a disposal and which assets can produce a gain.
  3. 3Exempt Assets and Exempt DisposalsThis comes next because it removes items from the charge. You must know the exempt lists well enough to spot them in a scenario.
  4. 4Computing Gains: Rates, Annual Exempt Amount and ReliefsNow apply the numbers: the £3,000 annual exempt amount, rates of 18% and 24%, and business asset disposal relief at 14% up to a £1,000,000 lifetime limit.
  5. 5Capital Gains Tax Payment, Reporting and Examinable DocumentsFinish with administration and the exam documents. It is easier to learn once you understand how the tax is calculated.

How to prepare The scope of the taxation of capital gains

Treat this chapter as a checklist you run in the same order every time. Then practise it on short scenarios until it is automatic.

  1. Learn the three scope questions in order: chargeable person, chargeable disposal, chargeable asset. Write them on one line and use it on every question.
  2. Practise the statutory residence test using the table from the exam. Work out the days in the UK, then count the UK ties, and check whether the person was previously resident.
  3. Make two lists from memory: exempt assets and exempt disposals. Then test yourself with scenarios and decide if each item is in or out.
  4. Learn the rates and allowances from the tax tables: £3,000 annual exempt amount, 18% and 24%, and 14% for business asset disposal relief. Practise which rate applies and how much of the basic rate band is left.
  5. Do a full gain computation: proceeds, less allowable costs, less reliefs, less losses, less the annual exempt amount, then tax at the right rate. Use a fixed layout.
  6. Finish with timed objective test questions and one written question. Review every wrong answer and write down the condition you missed.

Common mistakes in The scope of the taxation of capital gains

  • Computing a gain without first checking residence

    Fix: Make residence the first line of every answer. Count days and ties using the table before you do anything else.

  • Treating an exempt asset as chargeable

    Fix: Scan the asset type before computing. If it is on your exempt list, state that there is no gain and no loss, and stop.

  • Applying the wrong rate

    Fix: Work out how much basic rate band is unused. Tax gains within it at 18% and the rest at 24%. Apply 14% only to qualifying business asset disposal relief gains.

  • Confusing individual and company treatment

    Fix: Remember that CGT and its £3,000 annual exempt amount are for individuals. Companies include gains in profits for corporation tax and get no annual exempt amount.

  • Deducting the annual exempt amount in the wrong place

    Fix: Deduct current-year losses first, then apply the annual exempt amount once to the net gains for the tax year.

  • Memorising rates instead of learning when they apply

    Fix: Spend your time on conditions and application. Use the tables for the numbers.

Last-day revision: The scope of the taxation of capital gains

  • Ask three questions first: chargeable person, chargeable disposal, chargeable asset.
  • Individuals pay CGT on gains. Companies pay corporation tax on their gains.
  • Residence for CGT follows the statutory residence test: under 16 days is automatically not resident, and 183 or more is automatically resident.
  • Between those limits, the number of UK ties and previous residence decide the result.
  • The annual exempt amount is £3,000 for individuals.
  • CGT rates are 18% (lower rate) and 24% (higher rate).
  • Business asset disposal relief and investors' relief both have a £1,000,000 lifetime limit and a 14% rate.
  • Exempt assets and exempt disposals produce no chargeable gain and no allowable loss.
  • Check the scenario for exempt items before you start any computation.
  • Use the tax tables in the exam for rates and limits, and spend your revision time on how to apply them.
  • TX-UK in this period examines Finance Act 2025.

The scope of the taxation of capital gains practice questions

The scope of the taxation of capital gains in other exams

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

The scope of the taxation of capital gains: frequently asked questions

Do I need to memorise the CGT rates for TX-UK?

No. ACCA provides the tax rates and allowances in the exam, including the 18% and 24% rates and the £3,000 annual exempt amount. You must still know when each one applies. That is where marks are won or lost.

Who pays capital gains tax and who pays corporation tax on gains?

Individuals pay capital gains tax on their chargeable gains. Companies do not pay CGT. Their gains are included in their profits and charged to corporation tax.

How is UK residence decided for CGT?

Use the statutory residence test. Fewer than 16 days in the UK means automatically not resident, and 183 or more means automatically resident. In between, the result depends on the number of UK ties and whether the person was previously resident.

How are CGT questions tested in the exam?

They appear in objective test questions and in the constructed response section. Objective questions are all or nothing, so you need exact conditions. In written answers, a clear layout earns marks for each step you show.