Computing chargeable gains (Ch 13)

Which three elements must all be present for a chargeable gain to arise?

Chargeable person, chargeable disposal, chargeable asset.

Which two disposals are exempt from CGT?

Transfers on death; gifts to charity.

Which assets are exempt from CGT?

• Cars;

• Gilts and QCBs;

• Wasting chattels;

• Personal-use foreign currency;

• Medals for valour;

• Gold sovereigns minted after 1837;

• NS&I certificates and premium bonds;

• Gambling winnings;

• Inventory/current assets;

• ISAs;

• Damages for personal or professional injury.

Are medals exempt from CGT?

Only if awarded for valour or inherited. NOT if purchased

What is the CGT disposal date under a contract?

Date of the contract. If the contract is conditional, the date the condition is satisfied.

What is the CGT disposal date for a lost or destroyed asset?

The date compensation is received.

What is the CGT gain proforma?

Gross proceeds − incidental selling costs − cost (including incidental purchase costs) − enhancement expenditure = chargeable gain/(allowable loss).

What does NOT count as enhancement expenditure?

• Repairs and maintenance;

• Insurance;

• Expenditure deducted from trading profits;

• Expenditure met by public funds.

Is expenditure on an extension that has since been demolished allowable?

No. Enhancement must still be reflected in the asset at disposal.

Are legal fees for defending title to land allowable for CGT?

Yes, as enhancement expenditure (establishing, preserving or defending title).

What is the CGT annual exempt amount for 2025/26, and can it be carried forward or transferred to a spouse?

£3,000. No to both.

What are the CGT rates for individuals in 2025/26?

18% within the unused basic rate band; 24% above it; 14% for gains qualifying for BADR.

How is the basic rate band left for CGT worked out?

£37,700 + gross Gift Aid + gross personal pension contributions − taxable income. (Net pension × 100/80 to gross up.)

What is the order of loss relief in the year-end CGT computation?

Gains − current-year losses − AEA − brought-forward losses = taxable gains.

Must current-year capital losses be set off in full, even if gains then fall below the AEA?

Yes. They are compulsory, and the AEA may be wasted.

How much of brought-forward capital losses must be used?

Only enough to reduce gains after the AEA to nil. The rest is carried forward.

What happens to a net current-year capital loss?

It is carried forward against future gains (only to reduce them down to the AEA).

In which order are the AEA and losses set against mixed gains?

Residential property gains first (tax is due earlier), then gains taxed at the highest rate. BADR gains last.

When is CGT due on non-residential disposals in 2025/26?

31 January 2027.

When must the return and payment on account be made for a residential property disposal?

Within 60 days of completion of the disposal.

[check] What is deducted in the residential payment-on-account calculation, and what rate does your BPP card assume?

AEA, brought-forward losses, and current-year losses only up to the date of the residential disposal. The card assumes 24% (no basic rate band). Follow the question’s instruction.

When is the balance of CGT after a payment on account due?

31 January following the tax year, through self-assessment.

What are the three basic CGT planning points?

Use the AEA each year; realise gains in a year with lower taxable income; dispose early in the tax year to delay payment.

What is the part-disposal cost formula, and what are A and B?

Original cost of whole asset × A/(A+B). A = gross proceeds (or MV) of the part sold; B = MV of the remainder.

What two common errors occur in part disposals?

Deducting selling costs in A (A is gross proceeds; selling costs come off separately). Apportioning cost by number of items (it is by value).

What is the CGT treatment of a transfer between spouses/civil partners, and the planning point?

No gain/no loss; the recipient takes the transferor’s original cost. Transfer to the spouse with an unused AEA and/or lower tax rate before a sale.

How is compensation for a DAMAGED asset treated?

As a part disposal using A/(A+B), where A = compensation and B = value of the asset after damage but before restoration.

When can the part disposal on a damaged asset be avoided, and what is the base cost then?

By election, if all the compensation is spent restoring the asset. Base cost = original cost − compensation + restoration expenditure.

How is a DESTROYED or LOST asset treated?

As a full disposal when compensation is received.

What is the rollover relief for destroyed assets, and how much gain is chargeable now?

Reinvest in a suitable replacement within 12 months of receiving compensation. Chargeable now = proceeds not reinvested (capped at the total gain). The rest is deducted from the replacement’s base cost.

Damaged vs destroyed: which uses A/(A+B) and which gives rollover relief?

Damaged = A/(A+B) part disposal (or restoration election).

Destroyed/lost = full disposal, with possible rollover within 12 months.