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ACCA Strategic Professional · Advanced Taxation (UK) · Tax advantages and disadvantages of alternative courses of action

Ravi, a higher rate taxpayer, has 2025/26 gains of £50,000 qualifying for business asset disposal relief (previous claims nil) and £30,000 on non-qualifying shares. He has no losses. To minimise tax, how should the annual exempt amount be set, and what is the total capital gains tax?

Set the annual exempt amount against the non-qualifying gain taxed at 24%. Tax is £7,000 on the £50,000 BADR gain at 14% plus £6,480 on the £27,000 remaining gain at 24%, giving £13,480.

  1. ASet against the non-qualifying gain; tax is £7,000 + £6,480 = £13,480Correct
  2. BSet against the BADR gain; tax is £6,580 + £7,200 = £13,780
  3. CSet against the non-qualifying gain; tax is £7,000 + £7,200 = £14,200
  4. DSet against the BADR gain; tax is £6,580 + £6,480 = £13,060

Explanation

BADR gain is taxed at 14%, the non-qualifying gain at 24%, so the annual exempt amount saves more tax against the 24% gain. BADR: £50,000 x 14% = £7,000. Other: (£30,000 - £3,000) x 24% = £6,480. Total £13,480.

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