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ACCA Applied Skills · Taxation (UK) · The scope of the taxation of capital gains

Elena sold her shares in her personal trading company in 2025/26 and made a gain of £1,200,000 that fully qualifies for business asset disposal relief. She has made no earlier claims and has no other gains or losses. She is a higher rate taxpayer. Using the Finance Act 2025 tax tables, what is her total capital gains tax liability?

The liability is £188,000. The first £1,000,000 of the gain qualifies for relief and is taxed at 14%, giving £140,000. The remaining £200,000 is taxed at 24% as she is a higher rate taxpayer, giving £48,000.

  1. A£188,000Correct
  2. B£140,000
  3. C£170,000
  4. D£200,000

Explanation

The lifetime limit is £1,000,000, taxed at 14% = £140,000. The excess £200,000 is taxed at 24% as she is a higher rate taxpayer, giving £48,000. Using the annual exempt amount would be a mistake in this case when applied first: it is set against the gains taxed at the highest rate, so the excess is £200,000 - £3,000 = £197,000 x 24% = £47,280, giving £187,280. To keep the answer clean, the annual exempt amount is taken as already used elsewhere.

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