ACCA Strategic Professional · Advanced Taxation (UK)
Capital Gains Tax: The Basic Principles of Computing Gains and Losses
Capital gains tax (CGT) is charged on gains made when a chargeable person disposes of a chargeable asset. You compute proceeds less allowable costs, deduct losses and the annual exempt amount, then apply the correct rate. In ATX-UK you must also consider reliefs, share matching and payment dates.
What this chapter covers
This chapter is the base for all CGT in ATX-UK. It covers who is taxed, which assets are caught, how a gain or loss is computed, how losses are used, which rates apply and how shares are matched to disposals. It also covers business asset disposal relief and investors' relief, which cut the rate on qualifying gains.
You met most of this at TX-UK. At ATX-UK the examiner expects you to apply it faster and to spot the planning point in the scenario. Rates, the annual exempt amount and the relief limits are in the tax tables ACCA gives you. You do not need to memorise them, but you must know which table to use and when.
The chapter links to many other areas. Gifts and death bring in inheritance tax. Company share disposals link to owner-managed business advice. Trusts and groups use the same gain computation. Residence and overseas aspects decide whether a person is chargeable at all. If your basics are weak, every one of those areas loses marks.
CGT turns up in Section A case studies and in Section B questions, often combined with income tax, inheritance tax or business sale advice. The computation marks are usually the easiest to earn, and professional skills marks come from clear advice on reliefs and timing. Students who are precise on the basics have more time for the planning and judgement points that separate a pass from a near miss. Because the tax tables supply the rates and limits, the marks go to those who apply them correctly to the facts.
Capital gains tax: the basic principles of computing gains and losses: topics in the order to study them
- 1Scope of CGT and Chargeable Persons and AssetsYou must decide whether a gain is taxable at all before you compute it.
- 2Computing Chargeable Gains and Allowable CostsThe core gain calculation underpins every other topic in the chapter.
- 3Capital Losses and Their ReliefLoss rules build directly on the gain computation and affect the tax payable.
- 4CGT Rates, Annual Exempt Amount and PaymentOnce you have gains net of losses, you apply the annual exempt amount and the rates.
- 5Business Asset Disposal Relief and Investors' ReliefThese reliefs change the rate on qualifying gains, so you need the normal rates first.
- 6Share Disposals and Matching RulesShare matching feeds into the gain computation, and is easier once the full process is clear.
How to prepare Capital gains tax: the basic principles of computing gains and losses
Work from the order of a real answer: is it taxable, what is the gain, what reduces it, what is the tax. Practise on written scenarios, not just isolated sums.
- Read the tax tables for CGT first. Note the lower and higher rates, the annual exempt amount and the lifetime limits for business asset disposal relief and investors' relief.
- Learn the chargeable person and asset tests, then do short questions that ask only whether a disposal is taxable.
- Practise gain computations until the layout is automatic: proceeds, allowable costs, gain, then reliefs.
- Drill loss rules. Work out the order: current-year losses first, then the annual exempt amount, then losses brought forward only as needed.
- Apply rates by working out where the gain sits relative to the basic rate band, using the taxpayer's taxable income.
- Practise share matching with several purchases and a disposal, then add a relief claim to the same question.
- Finish with full past case-study questions. Write short advice notes, since professional skills marks depend on clear communication.
Common mistakes in Capital gains tax: the basic principles of computing gains and losses
Applying the wrong CGT rate to the whole gain
Fix: Always compute taxable income first, then fill the unused basic rate band with the gain.
Using the annual exempt amount before current-year losses
Fix: Set current-year losses against current-year gains first, then the annual exempt amount, then brought forward losses only as needed.
Treating business asset disposal relief as a deduction from the gain
Fix: Keep the relieved gain separate and tax it at 14%, within the lifetime limit in the tables.
Ignoring share matching order
Fix: Write out the matching order every time, then compute the gain on each matched block.
Computing the gain without checking if the person or asset is chargeable
Fix: Write a one-line scope check at the start of every answer, noting residence and asset type.
Giving only figures with no advice
Fix: Add a short recommendation on claims, timing of disposals and payment, and explain it simply.
Last-day revision: Capital gains tax: the basic principles of computing gains and losses
- CGT applies to chargeable persons making disposals of chargeable assets.
- Gain = proceeds less allowable costs, before reliefs and losses.
- Rates are 18% and 24%. Check the tax tables for the band position.
- The annual exempt amount in the tables is £3,000.
- Current-year losses must be set against current-year gains in full, even if that wastes the annual exempt amount.
- Brought forward losses are used only to reduce gains to the annual exempt amount.
- Business asset disposal relief has a £1,000,000 lifetime limit and a 14% rate.
- Investors' relief also has a £1,000,000 lifetime limit and a 14% rate.
- Match shares in the correct order before computing any gain.
- Use the taxpayer's taxable income to decide how much of the gain falls in the basic rate band.
- State your assumptions clearly when facts are missing.
- Give practical advice on timing and claims, not just figures.
Capital gains tax: the basic principles of computing gains and losses practice questions
- Ingrid sold a house to her brother, a connected person, for £150,000 in June 2025, making an allowable loss of £40,000. In 2025/26 she also …
- Mei Lin, a UK resident individual, gifts a chargeable asset to her friend. The market value at the date of gift is £90,000, she paid £60,000…
- Grace, a UK resident individual, sold an antique vase (a non-wasting chattel) for £9,000 net of any selling costs. She had bought it for £3,…
- Mehmet, a UK resident higher rate taxpayer, sold a painting in 2025/26 for a gain of £9,000 and sold shares in the same year at a loss of £5…
- Hana, a UK resident, made chargeable gains of £53,000 in the tax year and has no losses or reliefs. Her taxable income after allowances is £…
- For the tax year covered by the Finance Act 2025 tax rates and allowances issued for ATX-UK, which pair of capital gains tax rates applies t…
- Rahul sells his entire unincorporated trading business, which he has run for six years, and the gains qualify for Business Asset Disposal Re…
- Mara sells her unincorporated trading business and the gain qualifies for Business Asset Disposal Relief (BADR). She has made no earlier cla…
Capital gains tax: the basic principles of computing gains and losses in other exams
The same ground in other exams, if you are preparing for more than one or want another angle on it.
Capital gains tax: the basic principles of computing gains and losses: frequently asked questions
Do I need to memorise CGT rates for ATX-UK?
No. The tax tables provided in the exam give the rates, the annual exempt amount and the relief limits. You must know how to apply them to the facts.
What is the main difference between business asset disposal relief and investors' relief?
Both give a 14% rate and have a £1,000,000 lifetime limit in the tables. They apply to different types of disposals and conditions, so check the scenario facts before claiming either.
How do I use capital losses?
Set current-year losses against current-year gains first, with no choice to restrict. Then apply the annual exempt amount. Use brought forward losses only to reduce the gain down to the annual exempt amount.
Why does taxable income matter in a CGT question?
It decides how much of the basic rate band is left for gains. Gains in that band are taxed at the lower rate and the rest at the higher rate.