Advanced Taxation (UK) · Capital gains tax: gains and losses on the disposal of movable and immovable property

Capital Allowances, Stamp Taxes and IHT on Property Disposals

Updated 11 October 2026 · Fact-checked

This topic links the taxes on a property deal. SDLT on non-residential property is charged in slices (0%, 2%, 5%) and adds to your CGT cost. Stamp duty on shares is 0.5%. Capital allowances can be clawed back on sale. A gift may give CGT holdover relief and an IHT charge, so compute both.

Understand Capital Allowances, Stamp Taxes and IHT Interaction on Property

A property deal rarely attracts one tax. A buyer pays stamp taxes. A seller may face CGT, a clawback of capital allowances, or IHT if the property is given away. ATX questions test whether you spot every tax and see how they affect each other.

Stamp taxes on acquisition. Stamp duty land tax (SDLT) on non-residential property is paid by the buyer. It works like income tax bands: each slice of the price is taxed at its own rate. The rates are 0% up to £150,000, 2% on the slice from £150,001 to £250,000, and 5% above £250,000. Stamp duty on shares is 0.5% of the price, paid by the buyer. Round the duty up to the nearest £5. A gift with no consideration normally carries no SDLT or stamp duty.

Capital allowances. Buildings themselves do not qualify for plant and machinery allowances. Plant within a building can qualify: the main pool gets 18% and the special rate pool 6%. The annual investment allowance (AIA) gives 100% relief up to £1,000,000 of spending. Companies can also claim first year allowances of 100% on main pool and 50% on special rate pool expenditure. The structures and buildings allowance (SBA) gives 3% a year, straight line, on qualifying construction cost of non-residential structures. Land cost never qualifies. On a sale, any plant in the pool may give a balancing adjustment. SBA claimed is not clawed back by a balancing charge. It is brought into the CGT computation instead, and the buyer takes over the remaining allowance.

CGT links. SDLT and legal fees are allowable incidental costs of acquisition in the CGT computation. They get no income tax or corporation tax deduction. Individuals pay CGT at 18% or 24% after the £3,000 annual exempt amount. A gift is a disposal at market value, so a gain can arise even though no cash is received.

IHT links. A gift to an individual is a potentially exempt transfer (PET). It is tax-free if the donor survives seven years. A gift to a trust is a chargeable lifetime transfer (CLT). It is taxed at once at 20% on the excess over the nil rate band of £325,000. If the donor dies within seven years, the gift is taxed at 40%. Taper relief reduces that tax if death is more than three years after the gift. Gift holdover relief can defer the CGT gain. It is available on business assets. It is also available on any asset if the gift is immediately chargeable to IHT, such as a gift to a trust.

Key rules to remember

SDLT on non-residential property: 0% × first £150,000 + 2% × (£150,001 to £250,000) + 5% × excess over £250,000; Slice basis. Paid by the buyer. Apply each rate only to its own slice, never to the whole price.
Stamp duty on shares: 0.5% × consideration, rounded up to the nearest £5; Paid by the buyer. No duty on a gift with no consideration.
CGT cost of property: Purchase price + SDLT + legal fees + enhancement costs; SDLT is a capital cost. It gets no income tax or corporation tax deduction.
Capital allowance rates: Main pool 18%; special rate pool 6%; AIA 100% up to £1,000,000; SBA 3% straight line; Companies: first year allowance 100% main pool, 50% special rate pool. Buildings and land do not qualify.
CGT rates: 18% (basic rate band) and 24% (above); annual exempt amount £3,000; BADR rate is 14%, with a £1,000,000 lifetime limit.
Gift holdover relief: Gain held over = chargeable gain (or the relevant part). Donee's base cost = market value − gain held over; Business assets, or any asset if the gift is immediately chargeable to IHT (a CLT).
IHT rates: Lifetime 20% and death 40% on the excess over the £325,000 nil rate band; Residence nil rate band is £175,000. It applies on death only, where a home passes to direct descendants.
Taper relief on the tax: Years 3-4: 20%; 4-5: 40%; 5-6: 60%; 6-7: 80% reduction; It reduces the death tax, not the value of the gift. No relief if the death is within three years.

How to solve Capital Allowances, Stamp Taxes and IHT Interaction on Property questions

Use this order for any question about buying, selling or giving away property.

1List every transaction: purchase, sale, gift, lease. For each one, note who is the buyer or seller, whether the property is residential or non-residential, and whether the owner is an individual, a company or a trust.
2Work out stamp taxes on each purchase. Use the SDLT slices for non-residential property, and 0.5% for shares rounded up to £5. Identify the payer. Record that SDLT adds to the CGT cost.
3Deal with capital allowances. Separate plant from the building and land. Apply AIA, pool rates or SBA as the facts allow. Compute any balancing adjustment on disposal.
4Compute the CGT. Use proceeds (or market value for a gift) less allowable costs. Include SDLT and fees. Add back SBA claimed. Deduct the annual exempt amount, then apply 18% or 24%.
5If there is a gift, test for holdover relief. Check whether the asset is a business asset or the gift is a CLT. Reduce the gain and the donee's base cost.
6Compute the IHT. Classify the transfer as a PET or CLT. Apply the nil rate band, then 20% for lifetime tax. If the donor dies within seven years, apply 40% and then taper relief, less any lifetime tax paid.
7Summarise the total tax cost, who pays and when. Add the advice the question asks for, such as the best form of gift or the timing.

Quickest way: Property tax checklist: SDLT, allowances, CGT, IHT

When to use it: Use it when a scenario mixes a property purchase, a sale and a gift, and time is short.

Write four headings: SDLT or stamp duty, allowances, CGT, IHT.
Under SDLT, split the price into three slices and add them. Write the total straight into the CGT cost.
Under allowances, ask only whether plant or SBA is involved. If not, write 'none' and move on.
Under CGT, compute the gain first, then ask whether holdover relief is available. It is available for business assets or CLTs, and not for a gift of investment property to an individual.
Under IHT, label PET or CLT, apply the £325,000 band, and run the taper table only if death occurs in the question.

Common mistakes in Capital Allowances, Stamp Taxes and IHT Interaction on Property

Applying one SDLT rate to the whole price.
Students recall the rate for the top slice and use it for everything.
Fix: Slice the price. £0 to £150,000 at 0%, the next £100,000 at 2%, and the rest at 5%. Add the three results.
Leaving SDLT out of the CGT base cost, or deducting it against trading profits.
SDLT feels like a running cost.
Fix: Treat SDLT and legal fees as capital acquisition costs. Add them to the CGT cost and give no income tax deduction.
Claiming gift holdover relief on a gift of investment property to an individual.
Students remember 'gift relief' without its conditions.
Fix: Check the conditions first. The asset must be a business asset, or the gift must be a CLT (for example, to a trust).
Applying taper relief to the value of the gift or to the nil rate band.
The word 'taper' suggests the gift shrinks.
Fix: Compute death tax first using the nil rate band available. Then cut that tax by the taper percentage. Last, deduct lifetime IHT paid. The deduction cannot create a refund.
Claiming allowances on the building or the land.
Students think 'property' means allowances.
Fix: Only plant within the building and qualifying structure costs (SBA at 3%) qualify. Land never qualifies.
Forgetting to round stamp duty on shares up to the nearest £5 or to name the payer.
Students stop at the percentage.
Fix: Compute 0.5% of the price, round up to the next £5, and state that the buyer pays.

Worked examples

Example 1

Mala, a higher rate taxpayer, buys a non-residential building for £400,000 and pays legal fees of £6,000. Several years later she sells it for £520,000 and pays selling costs of £8,000. Compute the SDLT on the purchase and her CGT liability. Assume no other gains and no capital allowances claimed.

Show the solution

SDLT: 0% on the first £150,000 = £0.
2% on £100,000 (the slice from £150,001 to £250,000) = £2,000.
5% on £150,000 (the excess over £250,000, as £400,000 − £250,000) = £7,500.
Total SDLT = £2,000 + £7,500 = £9,500.
Base cost for CGT = £400,000 + £6,000 + £9,500 = £415,500.
Gain = £520,000 − £8,000 − £415,500 = £96,500.
Less annual exempt amount £3,000 = £93,500 taxable.
Mala is a higher rate taxpayer, so the rate is 24%. CGT = £93,500 × 24% = £22,440.

Answer: SDLT is £9,500, paid by Mala as buyer. Her CGT liability is £22,440.

Example 2

Raj gives investment land worth £500,000 to a discretionary trust. The land cost him £200,000. He has made no earlier transfers of value. The trustees pay any lifetime IHT, and annual exemptions are already used. Raj dies 4½ years after the gift. Explain the CGT position and compute the IHT on the gift at the time of the gift and on his death.

Show the solution

The gift is a disposal at market value, so the gain is £500,000 − £200,000 = £300,000.
The gift to a trust is a CLT, which is immediately chargeable to IHT. Gift holdover relief is therefore available even though the land is not a business asset. If a joint election is made, the whole £300,000 is held over. Raj has no CGT to pay, and the trustees' base cost is £500,000 − £300,000 = £200,000.
No SDLT arises because the gift involves no consideration.
Lifetime IHT: the nil rate band is £325,000 with no earlier transfers. The excess is £500,000 − £325,000 = £175,000. The trustees pay 20%, which is £35,000.
On death within seven years, the CLT is taxed at 40%. Tax is £175,000 × 40% = £70,000, using the nil rate band of £325,000 (assuming no earlier transfers in the seven years before the gift).
Death is more than 4 but less than 5 years after the gift, so taper relief is 40%. Tax after taper = £70,000 × 60% = £42,000.
Deduct the lifetime tax paid of £35,000. Additional tax on death = £42,000 − £35,000 = £7,000.

Answer: No CGT is payable if holdover relief is claimed, and the trustees take a base cost of £200,000. IHT is £35,000 at the time of the gift. A further £7,000 is payable on Raj's death.

Exam tips

Show the SDLT slices on separate lines. Marks go to each slice, and a wrong total can still earn method marks.
Check the owner type. Rates, reliefs and who pays differ for individuals, companies and trusts.
When a question says 'gift', run CGT and IHT as two separate computations, and state the link: holdover relief changes the donee's base cost but does not change the IHT.
Use the tax tables ACCA gives you. Do not rely on memory for rates, and state your assumptions when facts are missing.
Add a short comment or recommendation. Professional skills marks reward advice, such as whether to make the gift now or hold the property until death.

Practice questions from Capital gains tax: gains and losses on the disposal of movable and immovable property

Capital Allowances, Stamp Taxes and IHT Interaction on Property 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 SkillsCapital Allowances Interaction with Company Disposals

Capital Allowances, Stamp Taxes and IHT Interaction on Property: frequently asked questions

What are the SDLT rates for non-residential property in ATX?

They are 0% up to £150,000, 2% on the slice from £150,001 to £250,000, and 5% on the slice above £250,000. The rates apply to slices, not to the whole price. The buyer pays.

Is stamp duty on shares 0.5% in ATX UK?

Yes. Stamp duty on shares is 0.5% of the price, paid by the buyer. Round the duty up to the nearest £5. A gift with no consideration normally attracts no duty.

When is gift holdover relief available?

It is available when the asset is a business asset, or when the gift is immediately chargeable to IHT, for example a gift to a trust. A gift of non-business property to an individual does not qualify. When the relief applies, the gain is deferred and the donee's base cost is reduced.

How does capital allowance clawback affect CGT on a property sale?

Plant in a pool may produce a balancing adjustment. Structures and buildings allowance claimed is not clawed back as a balancing charge. It is brought into the CGT computation instead, and the buyer takes over the remaining allowance. Land costs never qualify.

Does the donor pay IHT on a gift to an individual?

Not at the time of the gift. It is a PET and is exempt if the donor survives seven years. If the donor dies within seven years, tax is charged at up to 40%, reduced by taper relief if death is more than three years after the gift.