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Taxation (UK) · The use of exemptions and reliefs in deferring and minimising tax liabilities arising on the disposal of capital assets

Exempt Assets and the CGT Annual Exempt Amount

Updated 11 October 2026 · Fact-checked

Exempt assets are assets whose disposal gives no capital gains tax, such as cars and most gilts. For other gains, an individual deducts losses and the £3,000 annual exempt amount, then pays 18% on gains within the unused basic rate band and 24% on the rest.

Understand Exempt Assets and the Annual Exempt Amount

Capital gains tax (CGT) applies when an individual disposes of a chargeable asset. Some assets are exempt. A gain on them is not taxed, and a loss on them cannot be used. That is why you must spot exempt assets first. Do not waste time computing a gain you will then ignore.

Common exempt assets in TX-UK include: private motor cars, gilt-edged securities and qualifying corporate bonds, investments held in an ISA, National Savings and Investments certificates, and betting, lottery and prize winnings. Your main home is usually covered by private residence relief, which is a separate topic. Chattels (tangible movable property) sold for £6,000 or less are also exempt. A wasting chattel (predictable life of 50 years or less, such as a racehorse or a boat) is exempt whatever the price.

After you have found the chargeable gains, set current-year losses against them. Then deduct the annual exempt amount (AEA), which is £3,000. Each individual has one. It is not carried forward and not transferable, so unused AEA is lost. Brought forward losses are different: you use only enough of them to reduce gains to the AEA, so you never waste the AEA on them.

The rate depends on your taxable income. The rates are 18% (lower) and 24% (higher). Gains are treated as the top slice of income. The part of the £37,700 basic rate band not used by taxable income is taxed at 18%. Any gain above that is taxed at 24%. Taxable income here means income after the personal allowance and other deductions.

This gives planning ideas. Use the AEA every year. Spread disposals across tax years. Transfer assets to a spouse or civil partner before sale, because such transfers are at no gain, no loss. Each spouse then has an AEA and their own basic rate band. Gift Aid and personal pension payments (gross) extend the basic rate band, which moves more gains into the 18% rate.

Key rules to remember

Taxable gains
Chargeable gains − current-year losses − brought forward losses (only as needed) − AEA
The AEA is £3,000. You cannot carry forward unused AEA. Brought forward losses reduce gains only down to the AEA.
CGT rates for individuals
18% within the unused basic rate band; 24% above it
The basic rate band is £37,700. Unused band = £37,700 − taxable income (after allowances). Gains that qualify for business asset disposal relief are taxed at 14% instead.
Chattel exempt limit
Proceeds ≤ £6,000 → exempt
Applies to non-wasting chattels. Wasting chattels are exempt regardless of the price.
Chattel gain cap
Maximum gain = 5/3 × (gross proceeds − £6,000)
Use when proceeds exceed £6,000 and cost is under £6,000. The gain is the lower of the normal gain and this cap.
Chattel loss rule
If proceeds < £6,000, treat proceeds as £6,000
Use when cost exceeds £6,000. This restricts the allowable loss.
Best use of AEA
Set the AEA against gains taxed at the highest rate first
This saves the most tax when gains are taxed at 24%, 18% or 14%.

How to solve Exempt Assets and the Annual Exempt Amount questions

Use this order for any question on exempt assets, the AEA and the CGT rates.

  1. 1List every disposal. Mark exempt assets (cars, gilts, QCBs, ISAs, NS&I certificates, winnings, wasting chattels, chattels sold for £6,000 or less) and leave them out.
  2. 2Compute the gain or loss on each chargeable asset. Apply the chattel rules if the asset is a chattel.
  3. 3Add up gains and set current-year losses against them first. Then use brought forward losses only down to the AEA.
  4. 4Deduct the AEA of £3,000. Show it, even if it covers the whole gain. Do not carry unused AEA forward.
  5. 5Find taxable income after the personal allowance and deductions. Unused basic rate band = £37,700 − taxable income. Add any gross Gift Aid or pension extension.
  6. 6Tax gains within the unused band at 18% and the rest at 24%. Apply 14% to gains qualifying for business asset disposal relief where the question says so.
  7. 7If asked for planning, check for a spouse transfer, splitting disposals across tax years, and using the AEA in each year.

Quickest way: Exempt first, then AEA, then band

When to use it: Use this in Section A or B objective questions where you need a CGT figure in about two minutes.

  1. Cross out exempt items at once.
  2. Net the gains and losses for the year.
  3. Subtract £3,000.
  4. Compute £37,700 − taxable income. If it is negative or nil, tax the whole taxable gain at 24%.
  5. Apply 18% to the lower of the taxable gain and the band left, then 24% to the rest.
  6. Check the answer is reasonable: tax must lie between 18% and 24% of the taxable gain.

Common mistakes in Exempt Assets and the Annual Exempt Amount

  • Including a car or gilt gain in the CGT computation.

    Students compute every gain in the question before checking its status.

    Fix: Screen for exempt assets first. Also ignore losses on them, since they cannot be relieved.

  • Deducting the AEA before current-year losses, or using brought forward losses to remove gains below the AEA.

    The order is easy to confuse.

    Fix: Current-year losses first, then brought forward losses only down to £3,000, then the AEA.

  • Using the whole £37,700 band without deducting taxable income.

    Students forget gains sit on top of income.

    Fix: Calculate unused band = £37,700 − taxable income after the personal allowance. Do not deduct the AEA from this band.

  • Treating a chattel sold for more than £6,000 as fully exempt, or applying the 5/3 cap when there is a loss.

    Students recall the £6,000 figure but not how the rule works.

    Fix: Over £6,000 the asset is chargeable, with the gain capped at 5/3 × (proceeds − £6,000). For a loss, treat proceeds as £6,000 if they were lower.

  • Carrying unused AEA forward or sharing it with a spouse.

    Students confuse the AEA with losses.

    Fix: The AEA is use-it-or-lose-it for each person. Plan by moving assets to a spouse so both AEAs are used.

  • Applying the AEA against the 18% gain when 24% gains exist.

    Students apply it in the order the gains appear.

    Fix: Offset the AEA against the gains taxed at the highest rate first.

Worked examples

Example 1

In 2025–26 Anil has taxable income of £30,000 after the personal allowance. He sells shares for a gain of £20,000 and a private car for a gain of £8,000. He has no losses. Compute his CGT.

Show the solution
  1. The car is an exempt asset, so its £8,000 gain is ignored.
  2. Chargeable gain on the shares = £20,000.
  3. Deduct the AEA: £20,000 − £3,000 = £17,000 taxable gain.
  4. Unused basic rate band = £37,700 − £30,000 = £7,700.
  5. Tax at 18%: £7,700 × 18% = £1,386.
  6. Remaining gain = £17,000 − £7,700 = £9,300. Tax at 24%: £9,300 × 24% = £2,232.
  7. Total CGT = £1,386 + £2,232 = £3,618.

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

Example 2

Meera sells two antiques. Antique A cost £2,500 and sold for £9,000. Antique B cost £7,000 and sold for £4,000. Neither is a wasting asset. Find the gain or loss on each.

Show the solution
  1. Both are non-wasting chattels. Antique A sold for more than £6,000, so it is chargeable. Antique B sold for £4,000, which is under £6,000, but it has a loss, so the loss rules apply.
  2. Antique A normal gain = £9,000 − £2,500 = £6,500.
  3. Antique A cap = 5/3 × (£9,000 − £6,000) = 5/3 × £3,000 = £5,000.
  4. The gain is the lower figure: £5,000.
  5. Antique B: proceeds are treated as £6,000 because the actual proceeds are lower and the cost exceeds £6,000.
  6. Antique B loss = £6,000 − £7,000 = £1,000 allowable loss.
  7. Net gain for the year before the AEA = £5,000 − £1,000 = £4,000.

Answer: Antique A gives a gain of £5,000 and Antique B an allowable loss of £1,000, so net chargeable gains are £4,000 before the £3,000 AEA.

Exam tips

  • Scan every scenario for exempt assets before you calculate anything. Examiners often add a car or gilts as a trap.
  • Always show the AEA line and the band calculation, because marks are given for each step in Section C.
  • State the rates as 18% and 24%, and show how much of the basic rate band is left.
  • For chattels, show both the normal gain and the 5/3 cap, then pick the lower.
  • In planning questions, mention spouse transfers, using the AEA each year and the Gift Aid or pension band extension.

Practice questions from The use of exemptions and reliefs in deferring and minimising tax liabilities arising on the disposal of capital assets

Exempt Assets and the Annual Exempt Amount 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 the Annual Exempt Amount: frequently asked questions

What is the CGT annual exempt amount for ACCA TX-UK?

It is £3,000 per individual per tax year. You deduct it after losses for the year. Any unused amount is lost.

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

Gains are taxed at 18% to the extent the basic rate band of £37,700 is not used by taxable income. The rest is taxed at 24%. Gains eligible for business asset disposal relief are taxed at 14%.

Is a chattel sold for more than £6,000 taxable?

Yes, it is chargeable, unless it is a wasting chattel. The gain is the lower of the normal gain and 5/3 × (proceeds − £6,000). That rule helps when the cost is under £6,000.

Can I use the annual exempt amount to reduce my tax through planning?

Yes. Spread disposals across tax years so each year's £3,000 is used. Transfer assets to a spouse or civil partner at no gain, no loss, so each of you uses an AEA and a basic rate band.