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

CGT Rates, Annual Exempt Amount and Computation of Gains

Updated 11 October 2026 · Fact-checked

For an individual, work out each gain as proceeds less allowable costs, net current-year losses, then deduct brought-forward losses only as far as needed to reduce gains to the annual exempt amount of £3,000. Tax the rest at 18% to the extent of unused basic rate band, and 24% above that.

Understand CGT Rates, Annual Exempt Amount and Computation of Gains

Capital gains tax (CGT) taxes the profit you make when you dispose of a chargeable asset, such as land, buildings or shares. It is a tax on the gain, not on the sale price. Each disposal produces a gain or a loss.

The basic gain is disposal proceeds less allowable costs. Allowable costs include the original purchase price, incidental costs of buying and selling (such as legal fees), and enhancement expenditure that is still reflected in the asset when you sell it. Day-to-day repairs are not allowable. If the disposal is a gift or a sale to a connected person, market value replaces proceeds.

You then pool the year's results. Current-year losses must be set against current-year gains in full, even if that wastes the annual exempt amount. Brought-forward losses are different. You use them only as far as needed to bring the net gain down to the annual exempt amount, which is £3,000. So brought-forward losses are never wasted.

The taxable gain is taxed using the rates in the tax tables: 18% (lower rate) and 24% (higher rate). The rate depends on how much of the taxpayer's basic rate band (£37,700) is unused after taxable income. Gains fill the band after income. Any gain within the unused band is taxed at 18%. Any gain above it is taxed at 24%. Gains eligible for business asset disposal relief are taxed at 14% within the lifetime limit of £1,000,000, but that is covered in its own topic.

The tax tables give the rates and the exempt amount in the exam. Your job is to apply them in the right order and show every working.

Key rules to remember

Basic gain: Chargeable gain = Disposal proceeds − Incidental costs of sale − Acquisition cost − Enhancement expenditure; Use market value instead of proceeds for gifts and connected-party sales.
Annual exempt amount: Annual exempt amount = £3,000; Deducted from net gains after current-year losses. It cannot be carried forward if unused.
Order of loss relief: Net gains = Current-year gains − Current-year losses; then deduct brought-forward losses only down to £3,000; Current-year losses are set off in full. Brought-forward losses are used only as needed. The balance carries forward.
Rates of CGT: 18% within unused basic rate band (£37,700 less taxable income); 24% on the rest; Taxable income is used first. Business asset disposal relief gains are at 14% up to a £1,000,000 lifetime limit.
Rate band test: Unused band = £37,700 − Taxable income (not below nil); Taxable income is after the personal allowance. If income already exceeds £37,700, all gains are at 24%.

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

Use this order for any CGT computation for an individual. It keeps the loss rules and rates correct.

1List each disposal and decide whether the asset is chargeable and the person is chargeable.
2For each disposal, compute proceeds (or market value if a gift or connected sale), less allowable costs, to get a gain or loss.
3Add up the gains and the losses arising in the tax year. Set current-year losses against current-year gains in full.
4If net gains exceed £3,000, deduct brought-forward losses only as far as needed to reduce the net gain to £3,000. If net gains are below £3,000, do not use brought-forward losses.
5Deduct the annual exempt amount (£3,000) to find taxable gains. If a loss remains, carry it forward.
6Compute taxable income after the personal allowance and find the unused basic rate band (£37,700 less taxable income).
7Tax gains at 18% up to the unused band and 24% above. Use 14% for any gain qualifying for business asset disposal relief, applying that rate first as the relevant topic explains.
8State the carried-forward loss and any other points the requirement asks for, such as payment date or advice.

Quickest way: Four-line gains summary

When to use it: Use when a question has several disposals and you must show tax and the loss carried forward.

Write one line per asset: proceeds, costs, gain or (loss).
Write the total of gains and total of current-year losses. Net them.
Write brought-forward losses used (only down to £3,000) and the exempt amount.
Write taxable gain, then split: band remaining at 18%, balance at 24%, with the loss carried forward at the bottom.

Common mistakes in CGT Rates, Annual Exempt Amount and Computation of Gains

Using the annual exempt amount before current-year losses.
Students think the exempt amount comes off each gain first.
Fix: Net current-year losses against gains first. Then deduct brought-forward losses only as needed. The £3,000 comes last.
Using brought-forward losses to cut gains to nil.
Students treat all losses alike.
Fix: Use brought-forward losses only to reduce net gains to £3,000, so the exempt amount is not wasted.
Applying 24% to all gains for a higher rate taxpayer without checking the band.
The rate is linked in memory to the income tax status.
Fix: Work out unused basic rate band from taxable income and tax gains at 18% up to that figure.
Using taxable income before the personal allowance, or ignoring the allowance.
Students rush the band calculation.
Fix: Use taxable income, which is after the personal allowance. Taxable income reduced by allowances determines how much band is left.
Including repairs or maintenance as allowable costs.
Any spending on the asset seems relevant.
Fix: Allow only acquisition costs, incidental costs and enhancement expenditure still reflected in the asset at disposal.
Carrying forward the wasted annual exempt amount or a loss that was used unnecessarily.
Students forget the exempt amount is use it or lose it.
Fix: Remember current-year losses are always set off in full, but the exempt amount is not carried forward. Check the carry forward figure last.

Worked examples

Example 1

In 2025/26 Priya has taxable income of £30,000. She sells a painting for a gain of £20,000 and shares for a gain of £8,000. She has a current-year loss of £5,000 on another asset and brought-forward capital losses of £10,000. Compute her CGT.

Show the solution

Total gains = £20,000 + £8,000 = £28,000.
Deduct current-year loss of £5,000: net gains = £23,000.
Brought-forward losses are used only to reduce gains to £3,000. Reduction needed = £23,000 − £3,000 = £20,000. Available loss is only £10,000, so all £10,000 is used.
Net gains after losses = £23,000 − £10,000 = £13,000.
Deduct annual exempt amount £3,000: taxable gain = £10,000.
Unused basic rate band = £37,700 − £30,000 = £7,700.
Tax: £7,700 × 18% = £1,386. £2,300 × 24% = £552.
Total CGT = £1,386 + £552 = £1,938.

Answer: CGT payable is £1,938, with no losses carried forward.

Example 2

Tom, with taxable income of £50,000, sells a house (not his home) for £400,000. Costs: purchase price £250,000, legal fees on purchase £3,000, extension built £40,000 and still there, selling costs £7,000. He also sold shares at a loss of £12,000 in the same year and has brought-forward losses of £6,000. Compute the CGT.

Show the solution

Proceeds less selling costs: £400,000 − £7,000 = £393,000.
Allowable costs: £250,000 + £3,000 + £40,000 = £293,000.
Gain on house = £393,000 − £293,000 = £100,000.
Deduct current-year loss £12,000: net gain = £88,000.
Net gain exceeds £3,000, so brought-forward losses of £6,000 are used in full: £82,000.
Deduct annual exempt amount £3,000: taxable gain = £79,000.
Taxable income of £50,000 already exceeds the basic rate band of £37,700, so no band is left. All gain is at 24%.
CGT = £79,000 × 24% = £18,960.

Answer: CGT payable is £18,960, with no losses carried forward.

Exam tips

Show the loss ordering clearly. Marks are given for setting current-year losses first and limiting brought-forward losses to what is needed.
Always compute the unused basic rate band from taxable income. Show the £37,700 figure and the subtraction.
Take rates and the £3,000 exempt amount from the tax tables provided. Do not rely on memory of earlier years.
Round to the nearest £ and show all workings, as the supplementary instructions require.
Write the loss carried forward at the end of the computation, even if it is nil.

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

CGT Rates, Annual Exempt Amount and Computation of Gains in other exams

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

CGT Rates, Annual Exempt Amount and Computation of Gains: 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 any unused basic rate band. The higher rate applies to the rest.

Can I carry forward an unused annual exempt amount?

No. The annual exempt amount of £3,000 is lost if you do not use it in the tax year. This is why brought-forward losses are used only as far as needed to reach it.

Do current-year losses have to be used first?

Yes. Current-year capital losses are set against current-year gains in full, even if that reduces gains below the annual exempt amount. Any excess current-year loss is carried forward.

How do I know if gains are taxed at 18% or 24%?

Compute taxable income after the personal allowance and subtract it from £37,700. The remaining band is taxed at 18% and any gains above it at 24%. If income is above £37,700, all gains are at 24%.