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ACCA Strategic Professional · Advanced Taxation (UK) · Capital gains tax: gains and losses on the disposal of shares and securities

Marcus makes a gain of £400,000 qualifying for investors' relief, and he has not previously claimed any investors' relief or business asset disposal relief. He is a higher rate taxpayer. Which is the maximum tax saving from the relief compared with the normal higher rate, ignoring the annual exempt amount?

The saving is £40,000. Without relief the £400,000 gain is taxed at 24%, giving £96,000, while investors' relief taxes it at 14%, giving £56,000. The difference is 10% of the gain, which is £40,000.

  1. A£40,000Correct
  2. B£16,000
  3. C£56,000
  4. D£100,000

Explanation

Normal tax at 24% on £400,000 is £96,000. Under investors' relief at 14% the tax is £56,000. The saving is £40,000, which equals 10% of the gain. The distractor £16,000 results from comparing with the 18% rate.

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