Jurisdiction(s):
United Kingdom

Key definition

Capital gain definition

What does Capital gain mean? Capital gain describes the profit realised when an asset is disposed of for more than its acquisition or base cost, after deducting allowable costs (for example, incidental acquisition and disposal expenses and qualifying enhancement expenditure). It arises on a disposal, not merely from an increase in value; an unrealised capital gain is a paper gain that would crystallise only if a disposal occurs. The opposite outcome is a capital loss. In practice, disposals include sales, gifts, part disposals and certain reorganisations. The concept is used across transactional, private client and corporate tax work because the timing, valuation and structure...

UK CGT: computing chargeable gains and losses, allowable costs, March 1982 rebasing, part disposals, residential property and carried interest rates, and non-resident UK land and property-rich entity disposals

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Practice notes

Introduction

A charge to capital gains tax (CGT) arises when a chargeable person makes a chargeable disposal of a chargeable asset, which may lead to a gain or a loss. The principles are outlined in the Practice Note: Introductory guide to CGT. This Practice Note sets out the general rules for deciding whether an individual has made a gain or loss on a chargeable disposal.

Basic CGT calculation

For disposals from 6 April 2008 onwards, a straightforward cash-based calculation applies. Begin with the sale proceeds (P) and deduct the incidental costs of sale (C) to reach a subtotal. From that balance, deduct the costs of acquisition (A) and add any enhancement expenditure (E). The resulting figure is the chargeable gain or allowable loss (G).

Allowable deductions from the proceeds

Incidental costs of making the disposal are deductible where incurred wholly and exclusively for the purposes of the disposal. These include:

legal fees
valuation fees
estate agency fees
auction fees
advertising costs for the sale...

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Web page updated on 22/05/2026

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