ACCA Strategic Professional · Advanced Taxation (UK) · Investment and other expenditure that reduces tax liabilities

Tariq, a higher rate taxpayer, sells his sole trader business in 2025/26 and makes a gain of £400,000 that qualifies in full for business asset disposal relief. He has made no previous claims and has no other gains. Using the Finance Act 2025 rates and the annual exempt amount of £3,000, what is his capital gains tax liability?

The liability is £55,580. The £3,000 annual exempt amount reduces the £400,000 gain to £397,000, and because the gain is fully covered by business asset disposal relief it is taxed at 14%, not at 18% or 24%.

A£55,580Correct
B£56,000
C£71,460
D£95,280

Explanation

The annual exempt amount is deducted from the only gain, leaving £397,000. All of it is within the £1,000,000 limit and is taxed at 14%, so tax is £397,000 × 14% = £55,580. £56,000 ignores the annual exempt amount. £71,460 uses 18% and £95,280 uses 24%, so both ignore the relief.

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