CGT—how to calculate a capital gain
CGT—how to calculate a capital gain

The following Private Client practice note provides comprehensive and up to date legal information covering:

  • CGT—how to calculate a capital gain
  • Introduction
  • Basic CGT calculation
  • Allowable deductions from the proceeds
  • Exceptions to the standard proforma
  • Assets held on 31 March 1982
  • Finding the market value of an asset on 31 March 1982
  • Part disposals
  • Enhancement expenditure and part disposals
  • Gain on disposal of residential property or carried interest on or after 6 April 2016
  • More...

Introduction

A charge to capital gains tax (CGT) arises when a chargeable person makes a chargeable disposal of a chargeable asset. The disposal may produce a gain or a loss. These principles are explained in the Practice Note: Introductory guide to CGT.

This Practice Note covers the general rules used to calculate whether an individual has made a gain or loss on the chargeable disposal of a chargeable asset.

Basic CGT calculation

The standard proforma for calculating the chargeable gain on the disposal of chargeable assets from 6 April 2008 onwards is a basic calculation of the cash profit:

££
Proceeds of saleX
Less: costs of sale(X)
X
Deduct:
Costs of acquisitionX
Plus: enhancement expenditureX
(X)
Chargeable gain or allowable lossX

Allowable deductions from the proceeds

Deductible costs of sale include legal fees, valuation fees, estate agency fees, auction fees and any costs of advertising for sale.

Deductible costs of acquisition include the purchase price or deemed purchase price (unless the asset was acquired before 31 March 1982, see below) and the incidental costs of acquisition (eg legal fees, survey fees, stamp duty land tax or equivalent).

Enhancement expenditure is capital expenditure which increases the value of the asset and is reflected in the state or nature of the asset at the time of the disposal. The most common type of enhancement expenditure is where a taxpayer incurs building costs in enhancing

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