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ACCA Strategic Professional · Advanced Taxation (UK) · Capital gains tax and trusts

Marcus, a higher rate taxpayer, previously claimed business asset disposal relief on gains totalling £700,000. In 2025/26 he sells another qualifying business and makes a gain of £500,000 that qualifies for the relief. He has no other gains or losses and has not used his annual exempt amount. What is his capital gains tax liability on the disposal, assuming the annual exempt amount is used in the most beneficial way?

The liability is £89,280. Only £300,000 of the lifetime limit is left, taxed at 14% for £42,000. The remaining £200,000 of the gain is taxed at 24%, after deducting the £3,000 annual exempt amount, which adds £47,280.

  1. A£89,580
  2. B£69,580
  3. C£89,280Correct
  4. D£95,280

Explanation

Only £300,000 of his £1,000,000 lifetime limit remains, so £300,000 is taxed at 14% = £42,000. The other £200,000 is taxed at 24%, and the annual exempt amount is best set against it: £197,000 × 24% = £47,280. Total tax is £89,280. £89,580 sets the exempt amount against the 14% gain instead, and £69,580 wrongly taxes the whole gain after the exempt amount at 14%.

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