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

Hannah sold a plot of land in the current tax year for £90,000. She had bought it for £60,000. She has taxable income of £60,000 after all reliefs and no other gains. What is her capital gains tax liability using the rates given (18% and 24%, annual exempt amount £3,000)? Assume the higher rate applies to all of the gain.

The capital gains tax is £6,480. The gain is £30,000, less the £3,000 annual exempt amount gives £27,000, taxed at the higher rate of 24% because her income already uses the basic rate band. Ignoring the exemption would wrongly give £7,200.

  1. A£6,480Correct
  2. B£7,200
  3. C£5,400
  4. D£6,000

Explanation

Gain = £90,000 - £60,000 = £30,000. Less annual exempt amount £3,000 = £27,000 taxable. Her income is above the basic rate band, so tax at 24% = £6,480. Using 18% would give £4,860, and ignoring the annual exempt amount gives £7,200.

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