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

Exempt Assets and Exempt Disposals for Capital Gains Tax

Updated 11 October 2026 · Fact-checked

An exempt asset is one whose disposal never creates a chargeable gain or allowable loss, such as a private car, gilts or qualifying corporate bonds. An exempt disposal is a transaction that escapes tax, such as a gift to charity or a transfer on death. To solve a question, identify the asset, then the disposal, and drop anything exempt.

Understand Exempt Assets and Exempt Disposals

Capital gains tax (CGT) only applies to chargeable disposals of chargeable assets by chargeable persons. Some assets and some disposals are outside the charge. Your first job in any CGT question is to remove them, because they take no part in the computation.

An exempt asset is exempt whoever owns it and however it is disposed of. Any gain is not taxed. Any loss is not allowable, so you cannot set it against other gains. The main exempt assets you must know are:

private motor cars
chattels (tangible movable property) sold for £6,000 or less (gains are exempt, but see the note on losses below)
wasting chattels, such as a greyhound or a boat, with a predictable life of 50 years or less (but a wasting chattel used in a business, on which capital allowances were or could have been claimed, is not exempt)
British government securities (gilts)
qualifying corporate bonds (QCBs)
ISAs, National Savings certificates and premium bonds
foreign currency acquired for personal use
decorations for valour, unless bought
betting, lottery and prize winnings
life assurance policies and deferred annuities, disposed of by the original beneficial owner (or someone who acquired them other than for money or money's worth)

Chattels need care on losses. A chattel with proceeds of £6,000 or less has its gain exempt. A loss is still allowable if the cost was above £6,000, with proceeds deemed to be £6,000. If the cost was also £6,000 or less, no loss is allowable.

The main residence is a special case. It is not wholly exempt as an asset. Principal private residence relief exempts all or part of the gain, depending on the period of occupation.

An exempt disposal is about the transaction, not the asset. A gift of an asset to a charity is exempt, and so is a disposal on death. On death there is no CGT for the deceased, and the beneficiary takes the asset at its value on death. Transfers between spouses or civil partners living together are not exempt in the strict sense. They are made on a no gain, no loss basis, so no tax arises at the time.

Keep the two ideas apart. Ask first: is the asset exempt? Then ask: is this particular disposal exempt? Either answer can remove the gain from the charge. The annual exempt amount of £3,000 is different again. It is a reduction taken from taxable gains, not an exemption of an asset.

Key rules to remember

Annual exempt amount: Taxable gains = Chargeable gains − losses − £3,000; Applies only to gains left after exempt assets and disposals are removed. Individuals only.
CGT rates for individuals: 18% (lower rate) or 24% (higher rate); The rate depends on how much of the basic rate band is left after taxable income. Business asset disposal relief gains are taxed at 14%.
Chattel sold for £6,000 or less: Proceeds ≤ £6,000 → exempt; The test uses proceeds only. Cost is irrelevant to the exemption. Gains are exempt. Losses are allowable only where cost exceeds £6,000, with proceeds deemed to be £6,000. Where cost is also £6,000 or less, no loss is allowable.
Chattel sold for more than £6,000 (gain): Gain = lower of (proceeds − cost) and 5/3 × (proceeds − £6,000); Use when proceeds exceed £6,000 and there is a gain. The 5/3 rule only bites where the normal gain is larger than 5/3 × the excess of proceeds over £6,000.
Chattel sold at a loss: Deemed proceeds = £6,000 if actual proceeds are below £6,000 and cost is above £6,000; Allowable loss = cost − £6,000. If cost is £6,000 or less, no loss is allowable.
Exempt disposals: Gift to charity = exempt; death = exempt; spouse transfer = no gain, no loss; Spouse transfers are not exempt. The recipient takes over the original cost.

How to solve Exempt Assets and Exempt Disposals questions

Use this order for any question that lists several assets or disposals. It shows the marker which items you have removed and why.

1List every asset disposed of, with proceeds and cost if given.
2Test each asset against the exempt asset list: cars, gilts, QCBs, ISAs, National Savings, foreign currency for personal use, betting winnings, wasting chattels.
3For tangible movable items, check the chattel limit of £6,000 and apply the 5/3 rule or the loss restriction if needed.
4Test each disposal: gift to charity, death, or a spouse transfer (no gain, no loss).
5Check whether the item is a main residence. If so, use principal private residence relief rather than treating it as exempt.
6Compute gains and losses on the remaining chargeable items only. Do not use losses from exempt assets.
7Deduct current-year losses, then the £3,000 annual exempt amount, and apply 18% or 24% as required.
8State briefly in your answer which items are exempt and why.

Quickest way: Cross out, then calculate

When to use it: Use in objective test questions and in the first minute of a constructed response question with many assets.

Scan the list and cross out cars, gilts, QCBs, ISAs, National Savings, currency and winnings.
Cross out gifts to charity and transfers on death.
For chattels, check proceeds. If proceeds are £6,000 or less, cross out the gain. But if cost is above £6,000, keep the item in for a loss, with proceeds deemed to be £6,000.
Mark spouse transfers as no gain, no loss.
Compute only what is left, then apply the £3,000 annual exempt amount.

Common mistakes in Exempt Assets and Exempt Disposals

Claiming a loss on a private car or on gilts.
Students see a loss and assume it can be used like any other capital loss.
Fix: Exempt assets have no allowable losses. Ignore both gains and losses on them.
Treating a gift to a spouse as an exempt disposal.
No tax is paid at the time, so it looks exempt.
Fix: Say no gain, no loss. The spouse takes over your cost and date of acquisition, so the gain is deferred, not removed.
Calling the main residence an exempt asset and ignoring the computation.
The word exempt is used loosely in the course.
Fix: Say that principal private residence relief applies. The gain is wholly or partly exempt depending on occupation.
Applying the 5/3 rule when the chattel sells for £6,000 or less, or ignoring the lower-of test.
Students memorise the formula without the conditions.
Fix: If proceeds are £6,000 or less, the chattel is exempt. Otherwise take the lower of the normal gain and 5/3 × (proceeds − £6,000).
Deducting the annual exempt amount before removing exempt items, or from an exempt gain.
Students confuse an exempt asset with the £3,000 relief.
Fix: Remove exempt items first. The £3,000 is deducted from net chargeable gains only.
Saying a death creates a CGT charge for the deceased.
Death looks like a disposal.
Fix: Death is an exempt disposal. The beneficiary acquires at market value at the date of death.

Worked examples

Example 1

In 2025/26 Nadia disposes of: (a) a private car, gain £8,000; (b) gilts, gain £5,000; (c) a vase bought for £2,000 and sold for £5,500; (d) a gift of land to a registered charity; (e) shares, gain £10,000. Compute her chargeable gains and taxable gains.

Show the solution

(a) Private car: exempt asset, so nothing is chargeable.
(b) Gilts: exempt asset, so nothing is chargeable.
(c) Vase: a chattel sold for £5,500, which is £6,000 or less, so it is exempt.
(d) Gift to charity: exempt disposal, so nothing is chargeable.
(e) Shares: chargeable, gain £10,000.
Total chargeable gains = £10,000.
Less annual exempt amount £3,000 = £7,000 taxable gain.

Answer: Chargeable gains are £10,000 and the taxable gain is £7,000, after the £3,000 annual exempt amount.

Example 2

In 2025/26 Omar, a higher rate taxpayer, sells a painting bought for £3,000 for £9,000, and sells shares at a gain of £10,000. He also sells his private car at a loss of £1,500. Compute his CGT.

Show the solution

Car: exempt asset, so the £1,500 loss is not allowable.
Painting: a chattel with proceeds over £6,000, so the chattel rules apply.
Normal gain = £9,000 − £3,000 = £6,000.
5/3 rule: 5/3 × (£9,000 − £6,000) = £5,000.
Painting gain = lower of £6,000 and £5,000 = £5,000.
Shares: gain £10,000.
Total chargeable gains = £5,000 + £10,000 = £15,000.
Less annual exempt amount £3,000 = £12,000.
CGT at 24% = £12,000 × 24% = £2,880.

Answer: Omar's CGT is £2,880. The car loss is ignored and the painting gain is limited to £5,000 by the 5/3 rule.

Exam tips

Write a short line for every item you remove, such as car: exempt asset. Markers award marks for identifying exemptions.
Remember that exempt assets give no loss relief. This catches many students in constructed response questions. The exception to watch for is a chattel with cost above £6,000 sold for less, where a loss is allowable using deemed proceeds of £6,000.
In objective test questions, watch for chattels. Check the £6,000 limit on proceeds before doing any calculation, and check cost if there is a loss.
Use the right words: exempt asset, exempt disposal, no gain no loss, and relief for the main residence. They mean different things.
Deduct the £3,000 annual exempt amount last, after removing exempt items and setting off losses.

Practice questions from The scope of the taxation of capital gains

Exempt Assets and Exempt Disposals in other exams

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

Exempt Assets and Exempt Disposals: frequently asked questions

What is the difference between an exempt asset and an exempt disposal?

An exempt asset is never chargeable, whoever owns it and however it is disposed of. An exempt disposal is a type of transaction that escapes tax, such as a gift to charity or a transfer on death. Assets can be chargeable but still be passed on by an exempt disposal.

Which exempt assets must I know for ACCA TX-UK?

Know private motor cars, chattels sold for £6,000 or less, wasting chattels (such as a greyhound or a boat, but not those eligible for capital allowances), gilts, qualifying corporate bonds, ISAs and National Savings products, foreign currency for personal use, winnings, and life assurance policies and deferred annuities disposed of by the original beneficial owner (or someone who acquired them other than for money or money's worth). The main residence has its own relief.

Are gilts and qualifying corporate bonds exempt?

Yes. Both are exempt assets, so gains are not chargeable and losses are not allowable. Do not confuse them with ordinary shares, which are chargeable.

Is a gift to my spouse an exempt disposal?

Not strictly. It is treated as a no gain, no loss transfer between spouses or civil partners who live together. The recipient takes your original cost, so the gain is deferred until they sell.