PP 7 - CGT

Question 2

When does Capital Gains Tax (CGT) arise?

Answer 2

When there is a chargeable disposal of a chargeable asset by a chargeable person, resulting in a chargeable gain.

Question 3

What are examples of chargeable disposals?

Answer 3

• Sale of an asset
• Lifetime gift of an asset

Question 4

What are chargeable assets under CGT?

Answer 4

• Valuable personal possessions (not cars)
• Non-physical assets (e.g., shares)
• Property (excluding main residence if Private Residence Relief applies)

Question 5

What conditions must be met for Private Residence Relief from CGT?

Answer 5

• Property was the person’s main home throughout ownership
• Not let out (lodger allowed)
• Not used for business (except temporary home office)
• Grounds ≤ 5000 m²
• Not bought for investment/gain
• For married couples: only one main home qualifies

Question 6

Who is a chargeable person under CGT?

Answer 6

A UK taxpayer (individuals, trustees, and personal representatives)

Question 7

What is a chargeable gain?

Answer 7

The increase in value of the asset, minus allowable expenses and any losses.

Question 8

What costs can be deducted when calculating CGT?

Answer 8

• Acquisition costs
• Costs improving the asset’s value
• Disposal costs

Question 9

Can losses be used to reduce CGT?

Answer 9

Yes, capital losses can offset gains.

Question 10

What is the annual CGT exemption (2024–2025)?

Answer 10

£6,000 per individual.

Question 11

How is CGT taxed for individuals?

Answer 11

Based on their income tax band:
* Basic rate taxpayers pay lower CGT
* Higher rate taxpayers pay more