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ACCA Strategic Professional · Advanced Taxation (UK)

Capital Gains Tax: The Scope of the Taxation of Capital Gains

Capital gains tax charges chargeable persons on gains from chargeable disposals of chargeable assets. To solve a question, check who is disposing, what is disposed of, and whether residence matters. Then compute the gain, deduct losses and the annual exempt amount, apply the right rate, and consider reliefs such as business asset disposal relief.

What this chapter covers

This chapter sets the frame for all capital gains work in ATX-UK. It asks a simple set of questions. Who is taxable? What is the asset? Has there been a disposal? Where is the person resident? Once you can answer these, the computation and the rate follow.

The chapter covers five areas: chargeable persons, assets and disposals; residence and overseas aspects; rates and the annual exempt amount; computing gains, losses and reporting deadlines; and business asset disposal relief and investors' relief. The ACCA tax tables give you the rates and limits, so your effort goes into knowing when each rule applies.

This chapter links to much of the rest of the paper. Gains feed into the income tax computation because the rate depends on taxable income. Inheritance tax and CGT interact on lifetime gifts. Company gains sit within corporation tax. Owner-managed business questions often combine share disposals, BADR and extraction of profit. Overseas questions combine CGT with residence and domicile.

CGT appears in Section A case studies and Section B questions, often combined with income tax, inheritance tax or corporate topics. The technical marks are easy to win if your basics are clean. The professional skills marks reward clear advice, such as whether a client should delay a disposal, use a spouse's annual exempt amount or claim a relief. Weak scope knowledge leads to wrong rates or missed reliefs, which then flow through the whole answer.

Capital gains tax: the scope of the taxation of capital gains: topics in the order to study them

  1. 1Chargeable Persons, Assets and Disposals for CGTStart here, because every other topic depends on knowing who is taxed, on what, and when a disposal occurs.
  2. 2Residence, Domicile and Overseas Aspects of CGTNext, decide whether the person falls within the charge at all, using the statutory residence test table and the overseas rules.
  3. 3CGT Rates and the Annual Exempt AmountOnce a gain is within scope, you need the 18% and 24% rates and the £3,000 annual exempt amount in order to tax it.
  4. 4Computing Gains and Losses and Reporting DeadlinesThis puts the rules into a working computation, including losses, and adds the compliance side of the answer.
  5. 5Business Asset Disposal Relief and Investors' ReliefStudy the reliefs last, as they change the rate and need the computation and rate rules to be secure first.

How to prepare Capital gains tax: the scope of the taxation of capital gains

Treat this chapter as a checklist you can run on any scenario. Build the checklist first, then practise it on exam-style questions.

  1. Write a one-page checklist: person, asset, disposal, residence, gain, losses, annual exempt amount, rate, relief, reporting.
  2. Learn the tax table figures by location, not by memory: CGT rates of 18% and 24%, the £3,000 annual exempt amount, and the £1,000,000 lifetime limit for BADR and investors' relief at 14%.
  3. Practise the statutory residence test using the days and ties table until you can read it without hesitation, noting the difference between previously resident and not previously resident.
  4. Work computations where the rate depends on taxable income. Compute income tax first, then see how much of the basic rate band remains for gains.
  5. Practise questions where a relief is optional and the best advice depends on the client's position, then write two or three sentences of advice.
  6. Finish with a full Section A style scenario under timed conditions and mark your professional skills as well as your numbers.

Common mistakes in Capital gains tax: the scope of the taxation of capital gains

  • Applying the wrong CGT rate to a gain.

    Fix: Compute taxable income first, find the unused basic rate band, then tax gains at 18% within it and 24% above it, unless a relief applies.

  • Misreading the residence table.

    Fix: Identify the person's history first, then pick the column, then count the UK ties.

  • Forgetting the annual exempt amount or using it in the wrong place.

    Fix: Make it a fixed line in your layout and think about how it is best used, especially across spouses.

  • Claiming business asset disposal relief without checking it applies.

    Fix: Check the conditions for the specific asset and person, then apply the £1,000,000 lifetime limit and any earlier use.

  • Writing a computation with no advice.

    Fix: Add a short recommendation tied to the scenario facts. Professional skills marks reward it.

Last-day revision: Capital gains tax: the scope of the taxation of capital gains

  • CGT applies to chargeable persons making chargeable disposals of chargeable assets.
  • Check residence first: the statutory residence test table gives automatic outcomes and tie-based outcomes.
  • Automatically not resident if fewer than 16 days in the UK; automatically resident at 183 days or more.
  • The tie thresholds are lower for someone previously resident than for someone not previously resident.
  • CGT rates are 18% (lower) and 24% (higher).
  • The annual exempt amount is £3,000.
  • Business asset disposal relief and investors' relief have a £1,000,000 lifetime limit and a 14% rate.
  • Use your income tax position to decide how much of the basic rate band is left for gains.
  • Set out every computation in a clear layout, with workings referenced.
  • State the reporting deadline and any payment deadline in your answer when asked about compliance.
  • Always say what you assume where the scenario is silent.
  • Add short, practical advice, since professional skills marks sit alongside the technical marks.

Capital gains tax: the scope of the taxation of capital gains practice questions

Capital gains tax: the scope of the taxation of capital gains 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 scope of the taxation of capital gains: frequently asked questions

What are the CGT rates in ATX-UK?

The tax tables give a lower rate of 18% and a higher rate of 24%. Business asset disposal relief and investors' relief use a 14% rate within a £1,000,000 lifetime limit.

What is the CGT annual exempt amount?

It is £3,000 in the ACCA tables for this exam. You deduct it from net gains after losses, so show it clearly in your computation.

Do I get the tax tables in the exam?

Yes. ACCA provides tax rates and allowances for ATX-UK. You still need to know where each figure applies and under what conditions.

How does residence affect CGT?

Residence decides whether a person is within the charge on gains. The statutory residence test table sets automatic results by days in the UK and uses UK ties in the middle ranges.

Is this chapter tested on its own?

Rarely. CGT usually appears with income tax, inheritance tax, corporation tax or owner-managed business advice, so practise it in combined scenarios.