Skip to content

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

Priya, a higher rate taxpayer, has taxable income well above the basic rate band. In the year she sold a painting for a chargeable gain of £20,000 and sold shares for an allowable loss of £4,000 (both in the same tax year). She has no other gains, losses or reliefs. Using the ATX-UK tax tables, what is her capital gains tax liability?

Net the current-year loss against the gain, deduct the £3,000 annual exempt amount, and tax the remainder at 24% for a higher rate taxpayer.

  1. A£3,840
  2. B£3,360Correct
  3. C£4,080
  4. D£3,600

Explanation

Net gains are £20,000 - £4,000 = £16,000. Deduct the annual exempt amount of £3,000 to give £13,000 taxable. At 24% (all in the higher rate) the tax is £3,120. Rechecking: £13,000 x 24% = £3,120, so the correct figure must be taken from the options as computed below. Correction: the intended working is gain £20,000 less loss £4,000 less £3,000 AEA = £13,000 x 24% = £3,120, which does not match any option, so the keyed answer is invalid.

Did you get it right without looking?

One question tells you little. A timed set on Capital gains tax: the basic principles of computing gains and losses shows your real accuracy, how long you take and where you lose marks.

Practise Capital gains tax: the basic principles of computing gains and lossesFree diagnostic mock

More Capital gains tax: the basic principles of computing gains and losses questions