Capital Gains Tax

Question 1

What triggers a Capital Gains Tax liability?

A) An employee bonus payment
B) A disposal of a chargeable asset by a chargeable person
C) Earning rental income from a property
D) Receiving interest on savings

Answer 1

B) A disposal of a chargeable asset by a chargeable person

Explanation:
CGT only applies when there is a disposal (sale or gift) of a chargeable asset by a chargeable person.

Question 2

What is the annual CGT exemption for individuals in 2024/25?

A) £6,000
B) £1,000
C) £3,000
D) £12,570

Answer 2

C) £3,000

Explanation:
For the 2024/25 tax year, the CGT annual exemption for individuals is £3,000.

Question 3

Which of the following is not subject to CGT?

A) Sale of a second home
B) Gift of company shares
C) Sale of a personal car used for leisure
D) Sale of investment bonds

Answer 3

C) Sale of a personal car used for leisure

Explanation:
Private motor vehicles are exempt from CGT.

Question 4

What rate of CGT applies to a basic rate taxpayer?

A) 10%
B) 18%
C) 24%
D) 45%

Answer 4

B) 18%

Explanation:
Basic rate taxpayers pay 18% on their capital gains (unless Business Asset Disposal Relief applies).

Question 5

If two connected persons transact, what value is used for CGT purposes?

A) The price actually paid
B) The original purchase price
C) The agreed discounted price
D) The market value at the date of disposal

Answer 5

D) The market value at the date of disposal

Explanation:
When assets are sold to connected persons, HMRC substitutes the full market value.

Question 6

Ben bought a flat for £150,000. He sells it to his sister for £100,000 when its market value is £200,000. What is the deemed consideration?

A) £100,000
B) £150,000
C) £200,000
D) £250,000

Answer 6

C) £200,000

Explanation:
Sales to connected persons are always treated at market value.

Question 7

Amy sells her small art studio and makes a £30,000 gain. She uses all the sale proceeds to buy another studio. What CGT relief might apply?

A) Gift relief
B) Business Asset Disposal Relief
C) Hold-over relief
D) Rollover relief

Answer 7

D) Rollover relief

Explanation:
If the proceeds are reinvested into another qualifying business asset, the gain can be rolled over.

Question 8

David has £20,000 non-savings income and £20,000 of gains. After £3,000 annual exemption, how is his CGT calculated?

A) All at 18%
B) All at 24%
C) Some at 18%, some at 24%
D) No CGT as within exemption

Answer 8

A) All at 18%

Explanation:
His taxable income and gains are within the basic rate band (up to £37,700), so CGT is 18%.

Question 9

Chloe bought shares for £5,000 and gifts them to her brother when worth £25,000. What is her gain?

A) £5,000
B) £30,000
C) £25,000
D) £20,000

Answer 9

D) £20,000

Explanation:
Deemed disposal at market value (£25,000) minus original cost (£5,000) = £20,000 gain.

Question 10

Matthew sells a business he owned for 5 years and makes £500,000 profit. He claims Business Asset Disposal Relief. What rate applies?

A) 10%
B) 18%
C) 24%
D) 20%

Answer 10

A) 10%

Explanation:
Qualifying disposals under Business Asset Disposal Relief are taxed at 10%.