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ACCA Strategic Professional · Advanced Taxation (UK) · Capital gains tax: the basic principles of computing gains and losses

Mehmet, a UK resident higher rate taxpayer, sold a painting in 2025/26 for a gain of £9,000 and sold shares in the same year at a loss of £5,000. He has no other disposals and no brought forward losses. Using the annual exempt amount of £3,000, what is his capital gains tax liability for 2025/26 at the higher rate of 24%?

The liability is £240. Current year losses are deducted from current year gains before the annual exempt amount, so £9,000 less £5,000 gives £4,000. After the £3,000 exempt amount, £1,000 is taxed at 24%, producing £240.

  1. A£240Correct
  2. B£0
  3. C£960
  4. D£1,440

Explanation

Current year loss is set against the current year gain first, giving net gains of £4,000 (£9,000 - £5,000). The annual exempt amount of £3,000 then reduces this to £1,000. Tax is £1,000 x 24% = £240. Option £960 wrongly ignores the loss and restricts only the annual exempt amount in a different way (£4,000 x 24%).

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