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ACCA Strategic Professional · Advanced Taxation (UK) · Legitimate tax planning measures

Omar, a higher rate taxpayer, has taxable income above the basic rate band in 2025/26 and made two gains: a £50,000 gain on a rental property (taxed at 24%) and a £40,000 gain on qualifying business goodwill eligible for BADR. He has used no BADR limit. What is his best use of the £3,000 annual exempt amount and his resulting total CGT?

Set the annual exempt amount against the gain taxed at 24% because it saves more tax than against the 14% gain. The property gain becomes £47,000 taxed at 24%, which is £11,280, plus £40,000 at 14%, which is £5,600, giving £16,880 in total.

  1. ASet against the property gain: tax £11,280 + £5,600 = £16,880Correct
  2. BSet against the goodwill gain: tax £12,000 + £5,180 = £17,180
  3. CSet against the property gain: tax £11,280 + £5,180 = £16,460
  4. DNot use it, as it is lost when BADR is claimed: tax £12,000 + £5,600 = £17,600

Explanation

The annual exempt amount saves more tax when set against the 24% property gain (£720) than against the 14% goodwill gain (£420). Property: (50,000 - 3,000) x 24% = £11,280. Goodwill: 40,000 x 14% = £5,600. Total £16,880. Option B uses the exemption against goodwill so saves less. Option D wrongly says the exemption is lost.

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