ACCA Applied Skills · Taxation (UK) · Gains and losses on the disposal of movable and immovable property
In the tax year Rhea, a higher rate taxpayer, made two disposals. The first was a sale of her business, giving a gain of £150,000 that qualifies for business asset disposal relief with no earlier claims. The second was the sale of a residential investment property, giving a gain of £20,000. She has no losses and her £3,000 annual exempt amount is available. What is her total capital gains tax liability, assuming the annual exempt amount is used in the way that minimises tax?
The liability is £25,080. The annual exempt amount is best used against the property gain, which is taxed at 24%. That gives £17,000 × 24% = £4,080. The £150,000 business gain is taxed at 14%, giving £21,000. Using the exemption against the relief gain would cost more tax.
- A£25,080Correct
- B£25,380
- C£25,800
- D£40,080
Explanation
The annual exempt amount saves most tax when set against the gain taxed at 24%. The property gain becomes £17,000, taxed at 24% = £4,080. The business gain of £150,000 is taxed at 14% = £21,000. Total = £25,080. £25,380 sets the exemption against the 14% gain instead. £25,800 ignores the exemption. £40,080 ignores the relief.
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