Advanced Taxation (UK) · Tax administration and the UK tax system

CGT and IHT Rates, Allowances and Reliefs for ACCA ATX-UK

Updated 11 October 2026 · Fact-checked

These are the fixed figures you take from the ATX-UK tax tables for capital gains tax and inheritance tax: CGT rates, the annual exempt amount, BADR and investors' relief, and the IHT nil rate bands, rates and taper relief. You must know which figure applies, and when.

Understand CGT and IHT Rates, Allowances and Reliefs

ATX-UK gives you tax tables in the exam. You do not need to memorise every number. You do need to know what each figure does and when to use it. This topic covers the CGT and IHT tables.

Capital gains tax (CGT) is charged on an individual's taxable gains. The table gives a lower rate of 18% and a higher rate of 24%. The annual exempt amount is £3,000. It is deducted from net gains for the year. After that, the taxable gain is taxed at the rates above, depending on how much basic rate band is left after taxable income.

Business asset disposal relief (BADR) and investors' relief both tax qualifying gains at 14%. Each has a lifetime limit of £1,000,000. The limits are separate. Use of one does not use up the other. The tables give the rate and limit only. You must know from your studies who qualifies. BADR is aimed at disposals of businesses and related shares by working owners. Investors' relief is aimed at outside investors in unlisted trading company shares. Check the conditions in the scenario before applying either.

Inheritance tax (IHT) has a nil rate band of £325,000 and a residence nil rate band of £175,000. Tax on the excess over the nil rate band is 20% on lifetime transfers and 40% on death. The residence nil rate band has its own conditions, so do not add it automatically. A lifetime chargeable transfer is taxed at 20%. Extra tax can arise if the donor dies within seven years.

Taper relief reduces the death tax on a lifetime gift when death falls more than three years after the gift. It reduces the tax, not the value of the gift. Reductions are 20%, 40%, 60% and 80% for death in years 4, 5, 6 and 7. There is no reduction for death within three years.

Key rules to remember

CGT rates: Lower rate 18%; higher rate 24%; Applied to taxable gains after the annual exempt amount. The rate depends on the unused basic rate band.
Annual exempt amount: £3,000; Deduct from net gains of the tax year. Set it against the gains taxed at the highest rate first (24%, then 18%, then 14%), as that saves the most tax.
BADR rate and limit: 14% on qualifying gains; lifetime limit £1,000,000; Gains above the lifetime limit fall back to the normal CGT rates. BADR gains use the basic rate band before other gains do.
Investors' relief rate and limit: 14% on qualifying gains; lifetime limit £1,000,000; A separate £1,000,000 limit from BADR.
IHT nil rate band: Nil rate band £325,000; Cumulates over the previous seven years for chargeable transfers.
Residence nil rate band: £175,000; Available only if its conditions are met. Check the facts before using it.
IHT rates: Lifetime 20%; death 40% on the excess over the nil rate band; Lifetime rate applies to chargeable lifetime transfers. Death rate applies to the estate and to gifts within seven years.
IHT taper relief: 3-4 years 20%; 4-5 years 40%; 5-6 years 60%; 6-7 years 80% reduction in tax; Reduces the tax payable, not the gift's value. Not available for death within three years.

How to solve CGT and IHT Rates, Allowances and Reliefs questions

Use this method for any question that asks for CGT or IHT on a disposal, gift or death.

1Identify the tax and the taxpayer: CGT or IHT, individual or estate, and the date of the event.
2Decide which relief or exemption might apply. For CGT, test BADR or investors' relief conditions. For IHT, test exemptions, nil rate band use and residence nil rate band conditions.
3Compute the gain or the value transferred first. Then deduct the annual exempt amount for CGT, or the available nil rate band for IHT. For CGT, set the annual exempt amount against the gains taxed at the highest rate first (24%, then 18%, then 14%).
4Choose the rate. For CGT, work out the basic rate band left after taxable income. Use that band against BADR gains first, so they are taxed before other gains in using it up. Other gains then fall into the 18% or 24% rates. For IHT, use 20% in life and 40% on death.
5For gifts followed by death, check the seven-year period. Work out the years between gift and death, then apply taper relief to the tax, if more than three years.
6Check the limits: £1,000,000 lifetime limit for BADR or investors' relief, and the available nil rate band after earlier transfers.
7State the final tax and give the due date or any planning point the question asks for.

Quickest way: Table-first checklist

When to use it: Use this when time is short and the question gives you most of the facts.

Write the rates you need from the tax tables at the top of your answer.
Mark the relief conditions as met or not met in one line each.
Deduct the AEA or nil rate band, then multiply by the correct rate.
For taper relief, count the whole years between gift and death and read off the percentage.

Common mistakes in CGT and IHT Rates, Allowances and Reliefs

Applying the taper percentage to the value of the gift.
The word relief suggests the gift itself is reduced.
Fix: Work out the death tax on the gift first, then reduce that tax by the taper percentage.
Using taper relief for death within three years.
Students remember the seven-year rule and forget that relief starts after year three.
Fix: Check the gap first. Under three years means no reduction.
Treating BADR and investors' relief as sharing one £1,000,000 limit.
Both reliefs have the same rate and the same limit.
Fix: The limits are separate. Track each one on its own.
Deducting the annual exempt amount against BADR gains first.
Students deduct it automatically from the first gain they list.
Fix: Set it against the gains taxed at the highest rate first: 24%, then 18%, then 14%. That saves the most tax. Use the basic rate band against BADR gains first.
Adding the residence nil rate band without checking conditions.
The £175,000 figure sits in the same table as the nil rate band.
Fix: Confirm the conditions are met in the facts before adding it to the £325,000.
Using 40% for a lifetime chargeable transfer.
Students mix up the lifetime and death rates.
Fix: Use 20% for lifetime transfers. Use 40% only at death, including on gifts that fail to survive seven years.

Worked examples

Example 1

Priya sells shares in her personal trading company and makes a gain of £400,000. At the date of sale she has held at least 5% of the ordinary share capital and voting rights for more than 2 years, and she is an officer of the company. She has made no earlier BADR claims. She has no other gains in the year. Calculate her CGT using the 2025/26 rates.

Show the solution

Priya holds at least 5% of the ordinary share capital and the voting rights, is an officer, and has held the shares for at least 2 years. The BADR conditions are met.
The lifetime limit of £1,000,000 is unused, so the whole gain is within the limit.
Deduct the annual exempt amount: £400,000 − £3,000 = £397,000. There are no other gains, so it is set against this gain.
Tax at 14%: £397,000 × 14% = £55,580.

Answer: CGT payable is £55,580.

Example 2

Tom made a gift of £500,000 to his nephew on 1 June 2019. He made no other gifts and no chargeable transfers in the 7 years before this gift. Tom died on 1 August 2024. Ignore annual exemptions and assume the nil rate band was £325,000 at death. Calculate the IHT on the gift as a result of his death.

Show the solution

The gift to an individual is a potentially exempt transfer. Death within seven years makes it chargeable. Annual exemptions are ignored, as the question says.
There were no earlier chargeable transfers in the 7 years before the gift, so the full £325,000 nil rate band is available.
Gap between gift and death: 5 years 2 months, which is more than 5 but less than 6 years, so taper relief is 60%.
Tax on the gift at 40% over the nil rate band: (£500,000 − £325,000) = £175,000 × 40% = £70,000.
Taper relief reduces the tax by 60%: £70,000 × 60% = £42,000 reduction.
Tax payable: £70,000 − £42,000 = £28,000.

Answer: IHT on the gift is £28,000.

Exam tips

Copy the relevant rates from the tax tables into your answer before you start the computation. It shows method and saves marks if you make an arithmetic slip.
In a mixed gain question, put the annual exempt amount against the gains taxed at 24% first, then 18%, then 14%. Use the basic rate band against BADR gains first, so the other gains are pushed into the higher rate.
For death within seven years of a gift, write the gap in whole years and state the taper percentage in one line. Markers look for it.
Do not assume reliefs apply. Test each condition against the facts, and say so in your answer.
Show every working, because the supplementary instructions require it and calculations need only be to the nearest £.

Practice questions from Tax administration and the UK tax system

CGT and IHT Rates, Allowances and Reliefs: frequently asked questions

What is the BADR rate and lifetime limit for ATX-UK?

The rate is 14% on qualifying gains. The lifetime limit is £1,000,000. Gains above that limit are taxed at the normal CGT rates.

What is the difference between investors' relief and BADR?

Both use a 14% rate and a £1,000,000 lifetime limit, and the limits are separate. BADR is for working owners disposing of a business or related shares. Investors' relief is for outside investors in unlisted trading company shares.

How does IHT taper relief work?

It applies when a donor dies more than three years after a lifetime gift that has become chargeable. It reduces the tax by 20%, 40%, 60% or 80% depending on the number of years. It does not reduce the value of the gift.

What is the CGT annual exempt amount?

It is £3,000 per individual for the tax year. You deduct it from net gains before applying the CGT rates.

Do I add the nil rate band and residence nil rate band together?

Only when the residence nil rate band conditions are met. The nil rate band is £325,000 and the residence nil rate band is £175,000, but you must check the facts first.