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Taxation (UK) · The scope of the taxation of capital gains

Computing Gains: Rates, Annual Exempt Amount and Reliefs for ACCA TX-UK

Updated 11 October 2026 · Fact-checked

Compute each gain as proceeds less cost and allowable costs. Deduct current-year losses, then brought-forward losses only as far as needed to reach the annual exempt amount (£3,000). Tax the rest at 18% or 24% depending on unused basic rate band. Qualifying BADR or investors' relief gains are taxed at 14%.

Understand Computing Gains: Rates, Annual Exempt Amount and Reliefs

Capital gains tax (CGT) taxes the profit an individual makes when disposing of a chargeable asset. The basic gain is disposal proceeds less the cost of the asset and allowable incidental costs of buying and selling. This guide starts after you know what a chargeable disposal is.

You work out each gain or loss separately. Then you add up the gains and losses for the tax year. Current-year losses must be set against current-year gains in full. This can waste the annual exempt amount, because you cannot choose to leave gains to use it.

Brought-forward losses are different. You use them only as far as needed to reduce net gains to the annual exempt amount, which is £3,000 in the exam rates. Any losses not used are carried forward. The annual exempt amount itself cannot be carried forward. Use it or lose it.

The taxable gain is then charged at 18% or 24%. The rate depends on how much of the individual's basic rate band is left after taxable income. Gains fall on top of income. The basic rate band is £37,700 of taxable income and gains. The part of the gain within the unused band is taxed at 18%, and the rest at 24%.

Gains that qualify for business asset disposal relief (BADR) or investors' relief are taxed at 14%. Each has a lifetime limit of £1,000,000 of gains. BADR is for the owners and employees involved in a business. Investors' relief is for outside investors in unlisted trading companies. The detailed qualifying conditions are covered in the separate relief topics. Here you only need the rate and the limit.

Key rules to remember

Basic gain
Chargeable gain = Disposal proceeds − (Cost + incidental costs of acquisition and disposal)
A negative result is a capital loss. Calculate each disposal separately.
Net gains for the year
Net chargeable gains = Gains − current-year losses (in full)
Current-year losses cannot be restricted to protect the annual exempt amount.
Brought-forward losses
Use b/f losses only to reduce net gains to £3,000
Unused losses carry forward. Do not waste the annual exempt amount.
Taxable gains
Taxable gains = Net gains after losses − annual exempt amount (£3,000)
The annual exempt amount cannot be carried forward or back.
CGT rates for individuals
18% within unused basic rate band; 24% above it
The basic rate band is £37,700. Reduce it by taxable income, which is taken first.
BADR and investors' relief rate
14% on qualifying gains up to £1,000,000 lifetime limit each
Gains above the limit are taxed at the normal 18% or 24%.

How to solve Computing Gains: Rates, Annual Exempt Amount and Reliefs questions

Use this order for any CGT computation for an individual.

  1. 1Calculate the gain or loss on each disposal: proceeds less cost and allowable costs.
  2. 2Add the gains and the losses for the tax year. Set current-year losses against the gains.
  3. 3Deduct brought-forward losses only down to the annual exempt amount of £3,000. If net gains are already £3,000 or less, use none.
  4. 4Deduct the annual exempt amount, which gives the taxable gains. Set it against the gains taxed at the highest rate first.
  5. 5Separate any gains that qualify for BADR or investors' relief. These are taxed at 14%.
  6. 6Find the unused basic rate band: £37,700 less taxable income. The BADR and investors' relief gains use up this band first, even though they are taxed at 14%. Only the band left after them is available for the other gains. Tax the other gains at 18% within the remaining band and at 24% above it.
  7. 7Add the tax charged at each rate and show your workings.

Quickest way: Rate-stacking shortcut

When to use it: Use it in objective test questions where you need the CGT liability fast.

  1. Net the year's gains and losses first. Do not touch brought-forward losses yet.
  2. Take off b/f losses and the £3,000 exempt amount to get taxable gains.
  3. Compute the unused basic rate band: £37,700 less taxable income. If taxable income is £37,700 or more, the band is nil.
  4. If BADR or investors' relief applies, tax those gains at 14%. They use up the unused basic rate band first. Band left for other gains = unused band less those gains, and not below nil.
  5. Multiply other gains within the band left by 18%. Multiply the rest by 24%. Set the exempt amount against the gains taxed at the highest rate first.

Common mistakes in Computing Gains: Rates, Annual Exempt Amount and Reliefs

  • Deducting all brought-forward losses even when gains are below the annual exempt amount.

    Students treat b/f losses like current-year losses.

    Fix: Use b/f losses only to bring net gains down to £3,000. Carry forward the rest.

  • Carrying forward unused annual exempt amount.

    It feels like losses, which can be carried forward.

    Fix: The annual exempt amount is lost if not used in the year.

  • Restricting current-year losses to protect the annual exempt amount.

    Students mix up the rules for current-year and b/f losses.

    Fix: Current-year losses must be offset in full.

  • Using the full £37,700 basic rate band without deducting taxable income.

    Students forget gains are taxed on top of income.

    Fix: Compute taxable income first, then find the band left for gains.

  • Taxing BADR gains at 18% or 24%.

    Students forget that the special rate is a separate rate.

    Fix: Tax qualifying BADR and investors' relief gains at 14% up to the £1,000,000 lifetime limit.

  • Confusing BADR with investors' relief.

    Both have the same rate and the same limit.

    Fix: Remember the user: BADR is for those involved in the business; investors' relief is for outside investors in unlisted trading companies.

Worked examples

Example 1

In 2025/26 Priya sold a painting for £20,000 (cost £8,000) and shares for £15,000 (cost £17,500). She has capital losses brought forward of £6,000. Her taxable income is £30,000. Calculate her CGT.

Show the solution
  1. Painting gain: £20,000 − £8,000 = £12,000. Share loss: £15,000 − £17,500 = £(2,500).
  2. Net gains after current-year loss: £12,000 − £2,500 = £9,500.
  3. Brought-forward losses used only to reach £3,000: £9,500 − £3,000 = £6,500 available, so use the full £6,000. Net gains: £3,500.
  4. Annual exempt amount: £3,500 − £3,000 = £500 taxable gain.
  5. Unused basic rate band: £37,700 − £30,000 = £7,700, so £500 is taxed at 18%.
  6. CGT: £500 × 18% = £90.

Answer: CGT payable is £90. No losses are carried forward.

Example 2

Tom sold shares in his own trading company and qualifies for BADR on a gain of £120,000. He also made a gain of £23,000 on a second property. His taxable income is £45,000. He has no losses and has made no earlier BADR claims. Calculate his CGT.

Show the solution
  1. Total gains: £120,000 + £23,000 = £143,000.
  2. Taxable income is above £37,700, so no basic rate band remains. The property gain is taxed at 24%.
  3. Annual exempt amount: deduct £3,000 from the gain taxed at the highest rate first, which is the property gain (24%). Property taxable gain: £23,000 − £3,000 = £20,000.
  4. Property tax: £20,000 × 24% = £4,800.
  5. BADR gain: £120,000 × 14% = £16,800. This is within the £1,000,000 limit.
  6. Total CGT: £4,800 + £16,800 = £21,600.

Answer: Tom's CGT payable is £21,600.

Exam tips

  • Write the full proforma in Section C, even if some lines are nil. Marks go for each step.
  • Check whether losses are current-year or brought-forward before deducting them.
  • Always compute taxable income before choosing 18% or 24%.
  • In objective questions, look for the trap: wasted annual exempt amount, or a 14% BADR gain mixed with normal gains.
  • Section C workings are required. Show tax at each rate separately.

Practice questions from The scope of the taxation of capital gains

Computing Gains: Rates, Annual Exempt Amount and Reliefs in other exams

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

Computing Gains: Rates, Annual Exempt Amount and Reliefs: frequently asked questions

What is the CGT annual exempt amount in TX-UK?

It is £3,000 for the exam rates. It applies to net gains after losses. If you do not use it, you lose it.

What are the CGT rates for individuals in ACCA TX-UK?

The rates are 18% and 24%. Gains within any unused basic rate band are taxed at 18% and the rest at 24%. The basic rate band is £37,700.

What is the difference between business asset disposal relief and investors' relief?

Both give a 14% rate and have a £1,000,000 lifetime limit. BADR is for those with a qualifying involvement in the business. Investors' relief is for outside investors in unlisted trading companies.

Do I use brought-forward capital losses in full?

No. You use them only to reduce net gains to the annual exempt amount. The unused balance is carried forward and can be used later.