Advanced Taxation (UK) · Capital gains tax: the scope of the taxation of capital gains

CGT Rates and the Annual Exempt Amount in ATX

Updated 11 October 2026 · Fact-checked

CGT for individuals is charged at 18% on gains falling within any unused basic rate band and 24% above it. Deduct the annual exempt amount of £3,000 from gains first. Gains sit on top of taxable income, so work out taxable income, find the remaining £37,700 band, then tax the gains. Trustees pay 24%.

Understand CGT Rates and the Annual Exempt Amount

Capital gains tax is charged on chargeable gains, after losses and the annual exempt amount. For individuals there are two main rates in the ATX tax tables: a lower rate of 18% and a higher rate of 24%. The rate depends on how much of your basic rate band is left after your income.

Gains are treated as the top slice of your total. Income is taxed first. So you compute taxable income (after the personal allowance and reliefs), then see how much of the £37,700 basic rate band is unused. Gains up to that unused amount are taxed at 18%. Any gains above it are taxed at 24%. If taxable income is already £37,700 or more, all gains are taxed at 24%.

The annual exempt amount (AEA) is £3,000 in the tax tables. It is deducted from gains after current-year losses. It is a deduction from the gain, not a tax credit. It is lost if unused, and cannot be carried forward.

Two special cases matter. Trustees pay CGT at 24%, with no 18% rate. Their AEA is normally half the individual amount, and is shared between trusts set up by the same settlor. Gains qualifying for business asset disposal relief or investors' relief are taxed at 14%, up to a lifetime limit of £1,000,000 for each relief. These gains use up the basic rate band first.

The exam tells you to assume 2025/26 rates and allowances continue unless told otherwise. If you search for 2026/27 figures, the exam still uses the tables printed in the paper.

Key rules to remember

CGT rates for individuals: Lower rate 18% | Higher rate 24%; 18% applies to gains within the unused basic rate band; 24% to the rest.
Annual exempt amount: AEA = £3,000; Deduct from net gains after current-year losses. Trustees normally get half, subject to the settlor sharing rule.
Taxable gain: Taxable gain = Chargeable gains − current-year losses − brought forward losses (only as needed) − AEA; Brought forward losses are used only to reduce gains down to the AEA, so the AEA is not wasted.
Unused basic rate band: Unused band = £37,700 − taxable income (not below nil); Taxable income is after the personal allowance and reliefs. The band is extended by gross Gift Aid donations and personal pension contributions.
Tax on gains: CGT = (gains within unused band × 18%) + (remaining gains × 24%); If there is no unused band, tax all taxable gains at 24%.
BADR and investors' relief rate: 14% on qualifying gains, lifetime limit £1,000,000 each; Qualifying gains use the basic rate band first. Other gains then fall into the higher band.
Trustees: Trustees' CGT rate = 24%; No basic rate band is available to trustees.

How to solve CGT Rates and the Annual Exempt Amount questions

Use this order for any question on CGT rates and the AEA for an individual or trustee.

1Identify the taxpayer. If trustees, use 24% and the trust AEA, then skip the band steps.
2Compute the total chargeable gains for the year and deduct current-year losses.
3Deduct brought forward losses only to the extent needed to reduce the net gains to the AEA, then deduct the AEA.
4Compute taxable income: total income less the personal allowance and any reliefs. Remember the personal allowance may be reduced or lost at higher incomes.
5Work out the unused basic rate band: £37,700 minus taxable income, plus any extension for gross Gift Aid or personal pension contributions.
6Tax BADR or investors' relief gains first, at 14%, using up the band. Then tax other gains: within the remaining band at 18%, the rest at 24%.
7If the AEA is split across gains at different rates, set it against the gains taxed at the highest rate first.
8State the total CGT and show each slice as a separate line with its rate.

Quickest way: Band-first shortcut

When to use it: Use for a normal individual with one type of gain and no BADR, when time is short.

Net gain = gains − AEA of £3,000 (after losses).
Remaining band = £37,700 − taxable income.
If remaining band is nil or negative, tax the whole net gain at 24%.
If remaining band exceeds the net gain, tax the whole net gain at 18%.
Otherwise tax the band amount at 18% and the balance at 24%, and add the two.

Common mistakes in CGT Rates and the Annual Exempt Amount

Using the income tax rates of 20% and 40% on gains.
Students mix up the two taxes because both use the £37,700 band.
Fix: Use the band only to decide which slice is 18% or 24%. Gains never attract 20%, 40% or 45%.
Putting gains before income when finding the unused band.
Students start with the disposal because the question is about CGT.
Fix: Always compute taxable income first. Gains are the top slice.
Using total income instead of taxable income to measure the band used.
The personal allowance is forgotten.
Fix: Deduct the personal allowance and reliefs first. Check whether the allowance is restricted at high incomes.
Applying the AEA against the wrong gains or wasting it with brought forward losses.
Students deduct all losses in full before the AEA.
Fix: Deduct current-year losses in full. Use brought forward losses only to bring gains down to the AEA. Set the AEA against 24% gains before 14% gains.
Taxing BADR gains at 14% but ignoring that they use up the basic rate band.
Students treat the 14% gain as separate from the bands.
Fix: Slot BADR gains in first. Other gains then see less band, or none.
Giving trustees the 18% rate or the full £3,000 AEA.
Trusts are treated like individuals.
Fix: Trustees pay 24% and normally get half the individual AEA.

Worked examples

Example 1

In 2025/26 Priya has taxable income of £20,000 after her personal allowance. She sells quoted shares for a gain of £30,000. She has no losses and BADR does not apply. Compute her CGT.

Show the solution

Gain £30,000 less AEA £3,000 = taxable gain £27,000.
Unused basic rate band = £37,700 − £20,000 = £17,700.
Gain at 18% = £17,700 × 18% = £3,186.
Remaining gain = £27,000 − £17,700 = £9,300, taxed at 24% = £2,232.
Total CGT = £3,186 + £2,232 = £5,418.

Answer: Priya's CGT is £5,418.

Example 2

In 2025/26 Rahul has taxable income of £30,000. He has a gain of £50,000 qualifying for business asset disposal relief and a gain of £20,000 on shares that does not qualify. He has no losses. Compute his CGT.

Show the solution

Unused basic rate band = £37,700 − £30,000 = £7,700.
The BADR gain is taxed first and uses the band. It is taxed at 14%, so £50,000 × 14% = £7,000.
The £7,700 band is fully used by the BADR gain, so the shares gain falls wholly in the 24% band.
Set the AEA against the share gain, which is taxed at the higher rate: £20,000 − £3,000 = £17,000.
CGT on shares = £17,000 × 24% = £4,080.
Total CGT = £7,000 + £4,080 = £11,080.

Answer: Rahul's CGT is £11,080.

Exam tips

Set out a short layout: gains, AEA, taxable income, unused band, tax at each rate. Marks go for each step shown.
Quote the rates from the tax tables, and state the assumption that 2025/26 figures continue if the question is silent.
Look for Gift Aid or pension contributions in the question. They extend the basic rate band and can move gains from 24% to 18%.
In planning questions, compare alternatives such as delaying a disposal to the next tax year to use a second AEA. Calculate the saving rather than just describing it.
Show professional skills by giving a clear recommendation and stating any assumptions about the client's other income.

Practice questions from Capital gains tax: the scope of the taxation of capital gains

CGT Rates and the Annual Exempt Amount 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 and the Annual Exempt Amount: frequently asked questions

What are the CGT rates for individuals in ATX?

The tax tables show a lower rate of 18% and a higher rate of 24%. Gains within the unused basic rate band are taxed at 18% and the rest at 24%. Qualifying BADR and investors' relief gains are taxed at 14%.

How much is the annual exempt amount?

It is £3,000 in the ATX tax tables. You deduct it from net gains after current-year losses. Unused AEA cannot be carried forward.

Do I use taxable income or total income to find the basic rate band?

Use taxable income, which is after the personal allowance and reliefs. Then deduct it from £37,700, adjusted for any Gift Aid or pension extension. Gains are taxed on top of that income.

Do trustees get the 18% rate?

No. Trustees pay CGT at 24%. Their AEA is normally half the individual amount, shared between trusts created by the same settlor.

Should I use 2026/27 rates in the exam?

Use the tax tables and the supplementary instructions printed in the exam. They tell you to assume 2025/26 rates and allowances continue unless the question says otherwise.