ACCA Applied Skills · Taxation (UK) · The basic principles of computing gains and losses
Fatima made chargeable gains of £14,000 and allowable losses of £2,000 in the current tax year, all on assets taxed at the main rates. Her taxable income is £60,000, and she has no brought forward losses. Using the annual exempt amount of £3,000, what is her capital gains tax liability?
Fatima's net gains are £12,000, reduced by the £3,000 annual exempt amount to £9,000. As her income already uses the basic rate band, all of it is taxed at 24%, giving capital gains tax of £2,160.
- A£2,160
- B£1,620
- C£2,880Correct
- D£2,640
Explanation
Net gains are £14,000 − £2,000 = £12,000. After the annual exempt amount of £3,000, the taxable gain is £9,000. Her taxable income of £60,000 exceeds the basic rate band of £37,700, so all of the gain is taxed at 24%: £9,000 × 24% = £2,160. Option £2,880 would wrongly ignore the losses... however the correct working gives £2,160.
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