ACCA Strategic Professional · Advanced Taxation (UK) · Capital gains tax: gains and losses on the disposal of movable and immovable property
In 2025/26, Tomas has a gain of £25,000 on a chargeable asset and a current-year capital loss of £7,000 on another asset. He also has brought forward capital losses of £10,000 from earlier years. He has no other gains. Which statement about the use of losses against the gains is correct?
Current-year losses are set off in full first, leaving £18,000. Brought forward losses are used only down to the annual exempt amount, so the full £10,000 is used, leaving £8,000, and after the £3,000 exemption £5,000 is taxable. Brought forward losses are never used before current-year losses.
- ACurrent-year loss of £7,000 is set off in full, then brought forward losses of only £5,000 are used to reduce the net gain to the £3,000 annual exempt amount, leaving £5,000 of losses carried forwardCorrect
- BBrought forward losses of £10,000 are used first, then the current-year loss, leaving a taxable gain of £5,000 after the annual exempt amount
- CCurrent-year loss is set off in full and all £10,000 of brought forward losses are used, leaving £8,000 of gains after which the annual exempt amount is deducted
- DThe annual exempt amount is deducted first, and losses are then set against the remaining gain of £22,000
Explanation
Current-year losses are set against current-year gains in full, even if this wastes the annual exempt amount, giving £18,000. Brought forward losses are used only to the extent needed to reduce gains to the annual exempt amount, so £15,000 is used. Hmm: £18,000 less £3,000 = £15,000 needed, but only £10,000 is available, so all £10,000 is used, leaving £8,000 less £3,000 AEA = £5,000 taxable.
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