Advanced Taxation (UK) · Capital gains tax and trusts

CGT Rates, Annual Exempt Amount and Computation Basics for ACCA ATX

Updated 11 October 2026 · Fact-checked

For an individual, you compute each gain as proceeds less allowable costs, add the gains together, deduct losses and the £3,000 annual exempt amount, then tax the result. The rate is 18% to the extent it falls within the unused basic rate band, and 24% above it. Business asset disposal relief gains are taxed at 14%.

Understand CGT Rates, Annual Exempt Amount and Computation Basics

A capital gain is the profit on disposing of a chargeable asset. You start with the disposal proceeds, or market value where the asset is gifted or sold to a connected person. You then deduct the original cost, incidental costs of buying and selling, and enhancement expenditure that is still reflected in the asset when you dispose of it. The result is the gain, or a loss if negative.

You add up all gains for the tax year. Then you deduct current year losses and any brought forward losses (the order matters, see the mistakes below). Then you deduct the annual exempt amount, which is £3,000 in the tax tables. What is left is the taxable gain. Where some gains are taxed at 14%, you set the annual exempt amount against the gains taxed at the highest rates first (see below).

The rate depends on the individual's income. Taxable gains are treated as the top slice of income, stacked on top of taxable income. Taxable income is income after the personal allowance and other deductions. Any unused part of the £37,700 basic rate band is used by the gains at 18%. Gains above that are taxed at 24%. So you must always work out income tax first, even in a pure CGT question.

Gains qualifying for business asset disposal relief or investors' relief are taxed first, at 14%, up to a lifetime limit of £1,000,000 for each relief. These gains use the basic rate band first. So the band left for other gains is the unused band less the qualifying gain, and it cannot go below nil. Other gains then fill what is left at 18%, and the rest is taxed at 24%.

Set the annual exempt amount against the gains taxed at the highest rates first. Use it against 24% gains, then 18% gains, then 14% gains. This saves the most tax.

The tax tables say to assume 2025/26 rates continue unless told otherwise. So if you search for 2026/27 rates, the exam still expects the tables in front of you. Tax reliefs that reduce income, or that extend the basic rate band, change how much band is left for gains. The cap on income tax reliefs limits some of those reliefs to the higher of £50,000 or 25% of income.

Key rules to remember

Gain on disposal: Gain = proceeds (or market value) − incidental selling costs − cost − incidental acquisition costs − enhancement expenditure; Use market value for gifts and for sales to connected persons. Show each figure separately in your working.
Taxable gain: Taxable gain = total gains − current year losses (deducted in full) − brought forward losses (only down to the annual exempt amount) − annual exempt amount; The annual exempt amount is £3,000. It cannot be carried forward or back if unused. Current year losses cannot be restricted. Only brought forward losses are used just as needed. Where some gains are taxed at 14%, set the annual exempt amount against the gains taxed at the highest rates first.
Main CGT rates: 18% (lower rate) and 24% (higher rate); 18% applies to gains within the unused basic rate band. 24% applies to the rest.
Unused basic rate band: Unused band = £37,700 − taxable income (after personal allowance and deductions); If taxable income is £37,700 or more, no band is left and all gains are taxed at 24%. Gross pension contributions and Gift Aid donations extend the band.
Business asset disposal relief and investors' relief: Rate 14%; lifetime limit £1,000,000 for each relief; Qualifying gains are taxed first at 14% and use the basic rate band first, so the band left for other gains is reduced (not below nil). The annual exempt amount goes against gains taxed at the highest rates first. Qualification conditions are covered in a separate topic.
Cap on income tax reliefs: Cap = higher of £50,000 or 25% of income; This applies unless a relief is otherwise restricted. It can limit reliefs that reduce income, which affects the band left for gains.
Personal allowance: £12,570, reduced to zero where adjusted net income is £125,140 or more; Used to find taxable income before stacking gains on top.

How to solve CGT Rates, Annual Exempt Amount and Computation Basics questions

Use the same order for every question on an individual's CGT. It keeps your working clear and earns the method marks.

1Compute each gain separately: proceeds or market value, less allowable costs. Show a short working for each asset.
2Add up the gains and deduct losses. Deduct current year losses in full first. Then deduct brought forward losses only down to the annual exempt amount.
3Deduct the £3,000 annual exempt amount to get the taxable gain. If some gains qualify for 14% relief, set the annual exempt amount against the gains taxed at the highest rates first (24%, then 18%, then 14%).
4Compute taxable income: total income less the personal allowance and any reliefs that reduce income (watch the cap on reliefs).
5Find the unused basic rate band: £37,700 less taxable income. Add the gross amount of any personal pension contribution or Gift Aid donation.
6Tax gains qualifying for business asset disposal relief or investors' relief first, at 14%. They use the basic rate band first, so the band left for other gains is the unused band less the qualifying gain (nil if the gain is bigger than the band). Then tax the other gains at 18% in the remaining band and 24% above it.
7Round each line to the nearest £, as the supplementary instructions say, and state the total CGT payable.
8Add a sentence for the client where the question asks for advice, for example on how a pension contribution lowers the tax.

Quickest way: Band-first shortcut

When to use it: Use this when the question gives you income and one or two gains and asks for the CGT liability.

Write taxable income and subtract it from £37,700. This is your band for gains. Add any gross pension contribution or Gift Aid donation.
Split the gains into those qualifying for business asset disposal relief or investors' relief (14%) and other gains. Deduct losses.
Set the £3,000 annual exempt amount against the other gains first, because they are taxed at higher rates. Use any left over against the 14% gain.
If there is a 14% gain, tax it first at 14%. It uses the basic rate band first, so reduce the band by that gain, but not below nil.
Multiply the smaller of the band left and the other taxable gain by 18%.
Multiply the rest of the other taxable gain by 24%. With no 14% gain, skip step 4 and use the full band.

Common mistakes in CGT Rates, Annual Exempt Amount and Computation Basics

Taxing the whole gain at 24% without checking the basic rate band.
Students treat CGT as separate from income tax and forget gains are stacked on top of income.
Fix: Always compute taxable income first and find the unused part of the £37,700 band before applying any rate.
Using the personal allowance against gains.
Students confuse the income tax allowance with the annual exempt amount.
Fix: The personal allowance reduces income only. Only the £3,000 annual exempt amount reduces gains. If income is below the allowance, the unused allowance is lost and does not shelter gains.
Wasting the annual exempt amount by offsetting brought forward losses in full.
Students deduct all losses before the exempt amount.
Fix: Current year losses must be set off in full. Brought forward losses are used only to reduce net gains to the annual exempt amount, so the exempt amount is not wasted.
Forgetting to extend the basic rate band for pension contributions or Gift Aid.
Students look at taxable income only and ignore the planning detail in the question.
Fix: Add the gross contribution or donation to £37,700. Be careful to use the gross figure, not the net payment.
Using market value only for gifts and ignoring connected persons.
Students default to the price actually paid.
Fix: Where the asset is gifted or sold to a connected person, use market value as the proceeds.
Mixing up the 14% and 18% or 24% rates for qualifying gains.
Students apply business asset disposal relief rate to the exempt-amount-reduced gain or forget the lifetime limit.
Fix: Check the qualifying gain separately, apply 14% within the £1,000,000 lifetime limit, then tax any other gains at 18% or 24% using the band left.

Worked examples

Example 1

Priya has a salary of £30,000 in 2025/26 and no other income. She sells shares for £90,000. She bought them for £40,000 and pays £2,000 of selling costs. She has no losses. Compute her CGT liability.

Show the solution

Gain: £90,000 − £2,000 − £40,000 = £48,000.
Less annual exempt amount £3,000 = taxable gain £45,000.
Taxable income: £30,000 − £12,570 personal allowance = £17,430.
Unused basic rate band: £37,700 − £17,430 = £20,270.
CGT at 18%: £20,270 × 18% = £3,648.60, which is £3,649 to the nearest £.
CGT at 24%: (£45,000 − £20,270) = £24,730 × 24% = £5,935.20, which is £5,935.
Total CGT: £3,649 + £5,935 = £9,584.

Answer: Priya's CGT liability is £9,584.

Example 2

Tom has a salary of £60,000 in 2025/26. He pays a personal pension contribution of £15,000 gross (£12,000 paid net of basic rate relief at source). He is within his annual allowance. He sells shares and makes a gain of £25,000, with no losses. Compute his CGT and the saving from the pension contribution.

Show the solution

Taxable income: £60,000 − £12,570 = £47,430.
Extended basic rate band: £37,700 + £15,000 = £52,700.
Unused band: £52,700 − £47,430 = £5,270.
Taxable gain: £25,000 − £3,000 = £22,000.
CGT at 18%: £5,270 × 18% = £948.60, which is £949.
CGT at 24%: (£22,000 − £5,270) = £16,730 × 24% = £4,015.20, which is £4,015.
Total CGT with pension: £949 + £4,015 = £4,964.
Without the pension, no band is unused (taxable income £47,430 exceeds £37,700), so CGT is £22,000 × 24% = £5,280.
Saving from the pension contribution on the gain: £5,280 − £4,964 = £316. As a check, £5,270 × 6% = £316.20. The saving is approximately £316 because each line is rounded to the nearest £, which causes the small difference.

Answer: Tom's CGT is £4,964. The pension contribution saves approximately £316 of CGT, in addition to the income tax relief it gives.

Exam tips

Always start with income tax. Write taxable income and the unused basic rate band at the top of your answer, even if the question only mentions CGT.
Copy rates from the tax tables in the exam. Do not rely on memory, and state the assumption that 2025/26 rates apply unless told otherwise.
Look for planning hooks: pension contributions, Gift Aid, losses and business asset disposal relief. Each changes the band or the gain, and examiners reward using it.
Show every figure and round each line to the nearest £. Method marks are lost when only a total appears.
In advice parts, explain why the tax falls, in one clear sentence, to earn professional skills marks for communication.

Practice questions from Capital gains tax and trusts

CGT Rates, Annual Exempt Amount and Computation Basics in other exams

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

ACCA Applied SkillsCGT Computation, Annual Exempt Amount and Rates

CGT Rates, Annual Exempt Amount and Computation Basics: frequently asked questions

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

The tax tables give a lower rate of 18% and a higher rate of 24%. The lower rate applies to gains within the unused basic rate band, and the higher rate applies to the rest. Gains qualifying for business asset disposal relief or investors' relief are taxed at 14%.

What is the annual exempt amount for CGT?

It is £3,000 in the tax tables. You deduct it from net gains after losses. If you do not use it in the tax year, it is lost.

How do income tax bands affect CGT?

Taxable gains are treated as the top slice of income. You work out taxable income after the personal allowance, then see how much of the £37,700 basic rate band is unused. Gains in that space are taxed at 18% and the rest at 24%.

Do the exam tables use 2026/27 rates?

The exam tables say to assume 2025/26 rates continue unless the question states otherwise. The papers examined from June 2026 to June 2027 use the Finance Act 2025. Always follow the question and the tables you are given.

Does the cap on income tax reliefs matter in CGT questions?

It can. The cap is the higher of £50,000 or 25% of income, unless a relief is otherwise restricted. If a relief that reduces income is capped, taxable income is higher and less basic rate band is left for gains.