CGT Exemptions and Reliefs for ATX-UK: Deferring and Minimising Tax

What this chapter covers

Capital gains tax: the use of exemptions and reliefs in deferring and minimising tax liabilities: topics in the order to study them

1. 1CGT Rates, Annual Exempt Amount and Loss PlanningEvery later relief is measured against the rates and annual exempt amount, so learn the base calculation and how losses are used first.
2. 2Business Asset Disposal Relief and Investors' ReliefThese reduce the rate on qualifying gains and use a lifetime limit, so they build directly on the rates.
3. 3Gift Holdover Relief and Rollover ReliefThese defer gains rather than reduce the rate, and they are the most common planning reliefs for business assets.
4. 4Incorporation Relief and Share ReorganisationsBoth defer gains through a change in the form of the asset and rely on the deferral ideas from holdover and rollover.
5. 5Reinvestment Reliefs: EIS and SEIS DeferralThese are investor-side deferrals with tight conditions, best learned once the other deferral reliefs are clear.
6. 6Exemptions: Principal Private Residence, Chattels and Gifts to CharityThese remove gains, or treat a genuine gift to charity as made at no gain and no loss. On a sale to a charity at an undervalue, the disposal is treated as made at no gain/no loss only if the proceeds do not exceed the allowable cost. Otherwise a gain arises. It is the proceeds received less only the part of the allowable cost relating to the part sold, that is allowable cost × (proceeds ÷ market value). Check these against the reliefs already learned when advising.
7. 7CGT Administration, Interest and Payment DeadlinesThis finishes the chapter by covering when tax is due and what interest applies, which supports the advice in every answer.

How to prepare Capital gains tax: the use of exemptions and reliefs in deferring and minimising tax liabilities

1. Learn the CGT rates, annual exempt amount and relief limits from the tax tables, and practise finding them fast in the exam.
2. For each relief, write a one-page card: what it does, who qualifies, the conditions, the limit and the effect on the base cost or gain.
3. Do short calculations for each relief on its own until the workings are automatic, including the lifetime limit for business asset disposal relief.
4. Practise comparison questions, such as sale against gift, or asset sale against share sale, and end each with a clear recommendation.
5. Work full past scenario questions under timed conditions and check that you have tested every condition against the facts given.
6. Add the administration points last: reporting, payment deadlines and interest, and note them in your advice where timing matters.
7. Review your answers for professional skills: a clear structure, short reasoned points and advice that fits the client's aims.

Common mistakes in Capital gains tax: the use of exemptions and reliefs in deferring and minimising tax liabilities

• Applying a relief without checking its conditions.

  Fix: Write each condition as a short check against the facts, and say clearly when one is not met.

• Using the annual exempt amount against the wrong gains.

  Fix: Set it against the gains taxed at the highest rate first, to save the most tax. That means the 24% gains first, then the 18% gains, then the 14% business asset disposal relief or investors' relief gains.

• Forgetting the lifetime limit on business asset disposal relief.

  Fix: Read for earlier disposals and deduct any used limit before applying the 14% rate.

• Getting the base cost wrong after a deferral relief.

  Fix: State the effect of each relief in one line and then compute the new base cost explicitly.

• Giving a calculation but no advice.

  Fix: End with a recommendation, the tax saved, the risks and any timing point, as the requirement asks.

• Ignoring payment deadlines and interest.

  Fix: Mention when the tax is due and the effect of late payment whenever the advice involves timing.

Last-day revision: Capital gains tax: the use of exemptions and reliefs in deferring and minimising tax liabilities

• ✓CGT rates are 18% and 24%, and the annual exempt amount is £3,000.
• ✓Business asset disposal relief and investors' relief each have their own separate £1,000,000 lifetime limit, and qualifying gains under either relief are taxed at 14%.
• ✓Set the annual exempt amount against the gains taxed at the highest rate first: the 24% gains, then the 18% gains, then the 14% business asset disposal relief or investors' relief gains last.
• ✓Gift holdover and rollover relief defer gains by reducing the base cost of the new or gifted asset.
• ✓Always test the conditions of a relief against the facts before applying it.
• ✓Incorporation relief defers the gain by reducing the base cost of the shares received.
• ✓Share reorganisations usually treat the new holding as the same asset as the old one.
• ✓EIS and SEIS deferral postpones a gain by reinvesting in qualifying shares, and the gain can come back into charge later.
• ✓Principal private residence relief removes gains on a main home, subject to its conditions.
• ✓Chattels have their own rules for small and larger disposals, so check the proceeds first.
• ✓A genuine gift to charity is treated as made at no gain and no loss. On a sale to a charity at an undervalue, no gain/no loss applies only if proceeds do not exceed allowable cost. Otherwise a gain arises: proceeds received less allowable cost × (proceeds ÷ market value), not the full allowable cost.
• ✓Interest on underpaid tax is 8.50% and on overpaid tax 3.50%, so timing of payment matters.

Capital gains tax: the use of exemptions and reliefs in deferring and minimising tax liabilities practice questions

• Priya, a UK resident higher rate taxpayer, sells a quoted share portfolio (not residential property) in the 2026/27 tax year and realises a …
• Tomas, a UK resident, has taxable income of £25,270 after the personal allowance for 2026/27. The basic rate band is £37,700. He sells a quo…
• Wei, a higher rate taxpayer, has a gain of £1,200,000 on a disposal of qualifying shares in his personal trading company that qualifies for …
• In 2026/27 Hannah, a higher rate taxpayer, has a chargeable gain of £15,000 on shares and an allowable capital loss of £9,000 on a different…
• Under the rates in the ATX-UK tax tables (Finance Act 2025), what is the rate of interest charged on underpaid tax, which would apply if an …
• Tariq incorporates his business and transfers assets with total chargeable gains of £120,000. In exchange he receives shares worth £240,000 …
• Under the ATX-UK tax rates for Finance Act 2025, which statement correctly describes the lifetime limits and rate for business asset disposa…
• Nadia is a higher rate taxpayer with a CGT liability of £20,000 for a tax year that was due for payment on 31 January but which she paid 60 …

Capital gains tax: the use of exemptions and reliefs in deferring and minimising tax liabilities 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 SkillsThe use of exemptions and reliefs in deferring and minimising tax liabilities arising on the disposal of capital assets