Capital gains tax calculator — methodology

The calculation, in order

1. Start from the gain you entered.
2. Deduct the annual exempt amount, once. What remains is the chargeable gain. The exempt amount does not consume any basic-rate band, which is why the exempt slice of a gain never pushes the rest of it into the higher rate.
3. Work out taxable income: gross income less the personal allowance that actually applies to it. That allowance tapers above £100,000, so this step runs through the income tax engine rather than subtracting a fixed figure.
4. Stack the chargeable gain on top of taxable income. The part landing below the basic-rate ceiling is taxed at the basic rate for gains; the rest at the higher rate. One gain routinely meets both — and a calculator that asks “are you a higher-rate taxpayer?” and applies one rate to the whole gain cannot produce the right answer for anyone straddling the boundary.
5. Gains qualifying for Business Asset Disposal Relief skip the stack entirely and are charged at a flat rate.

chargeable       = max(0, gain − annual exempt amount)
basic-rate room  = max(0, basic-rate ceiling − taxable income)
at basic rate    = min(chargeable, basic-rate room)
at higher rate   = chargeable − at basic rate

Rates and allowances

Capital gains tax is not devolved. The rates, the annual exempt amount and the basic-rate band for gains are the same across the UK; Scottish income tax bands differ but do not change which capital gains rate a gain meets.

Sources

• gov.uk — Capital gains tax rates and annual tax-free allowances
• gov.uk — Capital gains tax: rates
• gov.uk — Business Asset Disposal ReliefFor the relief rate and the £1 million lifetime limit, which this calculator reports but does not enforce.
• gov.uk — Income tax rates and allowances: current and pastThe personal allowance and the basic-rate band both come from the income tax rules, because a gain is taxed according to the income sitting underneath it.

Three limits that change the answer, stated here rather than buried

• The gain is yours to work out, and that is where it usually goes wrong. This page taxes the figure you enter. It does not derive it: there is no share matching, no same-day rule, no thirty-day rule and no s104 pooling, so a disposal out of a holding built up over several purchases needs the chargeable gain calculated before you get here. Enter a proceeds-less-cost figure where HMRC expects a pooled one and every number below is arithmetic on the wrong input.
• The Business Asset Disposal Relief lifetime limit is not applied. The relief is capped across every qualifying disposal you have ever made, and this calculator has no record of your earlier claims. If those claims have already used the cap, gains above it are charged at the ordinary rates and the figure this page shows is too low. Keep your own running total.
• One asset class per calculation. Every run deducts a full annual exempt amount, so running the page twice and adding the results deducts the exemption twice and understates the bill. A year with disposals in more than one class needs the exemption set against the gains taxed at the highest rate and the remainder stacked in a single calculation, which this page does not do.