Capital Gains Tax (CGT)

• Topic 01

  Capital Gains Tax (CGT)

  32 questions

A few questions from this unit, with the answer and a full explanation. The complete bank is available when you start practising.

1. What is the CGT rate on non-residential property gains for a basic-rate taxpayer in 2025/26?

   • A
     28%
   • B
     18%
   • C
     10%
     Correct answer
   • D
     10% for assets held over 2 years, 20% for assets held under 2 years
   Explanation

   For non-residential property and other assets (shares, business assets, etc.) disposed of from 30 October 2024 onwards, the CGT rates are: 10% for gains falling within the available basic-rate band, and 20% for gains falling in the higher or additional-rate band. The 10% rate applies to the extent that the taxpayer has unused basic-rate band after accounting for income. Residential property rates are different: 18% (basic rate) and 24% (higher rate).

2. What is the Annual Exempt Amount (AEA) for CGT in 2025/26?

   • A
     £12,300
   • B
     £6,000
   • C
     £3,000
     Correct answer
   • D
     £1,500
   Explanation

   The Annual Exempt Amount for CGT in 2025/26 is £3,000. This is the amount of net chargeable gains an individual can realise in a tax year without paying any CGT. The AEA was significantly reduced in recent years: from £12,300 (2022/23 and earlier), to £6,000 (2023/24), to £3,000 (2024/25 onwards). Unused AEA cannot be carried forward to future tax years.

3. Which assets are exempt from CGT? Give four examples.

   • A
     Principal private residence (main home), ISA holdings, gilt-edged securities (UK government gilts), private motor cars
     Correct answer
   • B
     Foreign currency held for personal use, gilts, main home, and shares in VCT funds
   • C
     Shares held for more than 2 years, ISA holdings, gilts, and pension funds
   • D
     Any asset held for more than 10 years, ISA holdings, gilts, and a main home
   Explanation

   Key CGT-exempt assets include: (1) Principal private residence (main home) — fully exempt under PPR relief; (2) ISA holdings — all gains and income within an ISA are free of tax; (3) Gilt-edged securities (UK government gilts) — always CGT-exempt; (4) Private motor cars — wasting assets exempt from CGT. Other exempt assets include: qualifying corporate bonds (QCBs), chattels (tangible moveable property) sold for £6,000 or less, NS&I savings certificates, UK government securities, betting/lottery winnings, and compensation for personal injury.