CGT Computation for Individuals

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Questions and Answers

The total amount received from selling an asset is known as the ______.

Disposal Proceeds

Costs related to the sale, such as legal fees or agent fees, are referred to as ______.

Incidental Costs of Disposal

The cost of acquiring the asset and any improvements made to it is known as ______.

Allowable Expenditure

Any capital losses from previous years or the same tax year that can be offset against the gain are called ______.

<p>Capital Losses</p>
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The CGT allowance that individuals can use to reduce their taxable gain is known as ______.

<p>Annual Exemption</p>
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The final amount on which CGT is calculated after all deductions is called ______.

<p>Taxable Gains</p>
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To remember the sequence of CGT computation for individuals, the mnemonic used is ______.

<p>DIA-CAT</p>
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Match the components of CGT computation with their descriptions:

<p>Disposal Proceeds = The starting point of CGT computation Incidental Costs = Legal fees and costs related to asset sale Allowable Expenditure = The cost of acquiring the asset and improvements Annual Exemption = The allowable CGT deduction for individuals</p>
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Match the terms related to CGT computation with their meanings:

<p>Taxable Gains = Amount on which CGT is calculated Capital Losses = Losses from previous disposals that offset gains DIA-CAT = Mnemonic to remember the CGT computation sequence Legal Fees = Type of incidental costs subtracted from disposal proceeds</p>
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Match the CGT computation steps with their order in the process:

<p>D: Disposal Proceeds = 1st step in CGT calculation I: Incidental Costs = 2nd step, deducted after disposal proceeds C: Capital Losses = 4th step, deducted after allowable expenditure A: Annual Exemption = 5th step, allowance to reduce taxable gains</p>
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Match the CGT aspects to their corresponding details:

<p>Allowable Expenditure = Includes original cost and improvement costs Taxable Gains = Final amount after all deductions Disposal Proceeds = Total amount received from selling an asset Annual Exemption = Specific amount allowed as a deduction annually</p>
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Match the definitions with the CGT terms:

<p>Disposal Proceeds = Total amount received from the sale of an asset Incidental Costs = Costs like agent fees associated with the sale Allowable Expenditure = Costs for acquiring the asset Taxable Gains = Final calculated amount for CGT assessment</p>
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Match the types of costs with their CGT computation role:

<p>Incidental Costs = Subtracted from the disposal proceeds Capital Losses = Can offset taxable gains from previous years Allowable Expenditure = Deducted after incidental costs in computation Annual Exemption = Deduction that limits taxable gains annually</p>
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Match the mnemonic components to their meanings in CGT:

<p>D = Disposal Proceeds- starting point of CGT A = Annual Exemption- limit on taxable gains T = Taxable Gains- final amount for CGT computation C = Capital Losses- offset against taxable gains</p>
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Match the steps of CGT computation with their correct sequence:

<ol> <li>Disposal Proceeds = Initial starting figure</li> <li>Incidental Costs = Costs deducted first</li> <li>Allowable Expenditure = Costs for acquiring and improving</li> <li>Taxable Gains = Amount after all deductions, subject to CGT</li> </ol>
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Match each CGT component with its definition:

<p>Disposal Proceeds = The total amount received from selling an asset Allowable Expenditure = The cost of acquiring the asset and any improvements made to it Annual Exemption = The CGT allowance available to individuals Taxable Gains = The final amount on which CGT is calculated after deductions</p>
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Match the deduction type with its explanation in CGT computation:

<p>Incidental Costs = Costs related to the sale like legal fees Capital Losses = Losses from previous disposals that can offset gains Allowable Expenditure = Original cost of the asset plus improvements Annual Exemption = A fixed allowance to reduce taxable gains</p>
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Match the terms of the CGT computation with their roles:

<p>Disposal Proceeds = Starting point in the computation Capital Losses = Deductible losses to reduce taxable gains Annual Exemption = Amount individuals can deduct annually Taxable Gains = Final amount subject to CGT</p>
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Match the mnemonic components to their meanings in CGT process:

<p>D = Disposal Proceeds I = Incidental Costs C = Capital Losses A = Allowable Expenditure</p>
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Match the elements of CGT deduction with their sequence:

<p>Disposal Proceeds = First component considered Less Incidental Costs = Second component deducted Allowable Expenditure = Third step in the computation Taxable Gains = Final result after deductions</p>
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Match each component of CGT computation with the adjustment it provides:

<p>Incidental Costs = Reduced total from sale Allowable Expenditure = Offsets cost of acquisition Annual Exemption = Limits taxable gains amount Capital Losses = Reduces taxable gain from current or past</p>
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Match the terms in CGT with their correct descriptions:

<p>Disposal Proceeds = Total received from selling an asset Taxable Gains = Amount after deductions that is taxable Capital Losses = Offsetting losses to lower taxes Annual Exemption = Standard amount deducted from taxable gains</p>
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Match the definitions related to CGT with the correct term:

<p>Taxable Gains = Final calculation of CGT Allowable Expenditure = Costs linked to purchase or improvements Disposal Proceeds = Revenue from asset sale Incidental Costs = Expenses incurred in the sale process</p>
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Study Notes

CGT Computation for Individuals

  • Starting Point: Disposal Proceeds - The total amount received from selling an asset.
  • Deductions:
    • Incidental Costs of Disposal: Costs related to the sale, such as legal fees or agent fees.
    • Allowable Expenditure: The cost of acquiring the asset and any improvements made to it.
    • Capital Losses: Any capital losses from previous years or the same tax year that can be offset against the gain.
    • Annual Exemption: The CGT allowance that individuals can use to reduce their taxable gain (e.g., £3,000 for 2024/25).
  • Final Calculation: Taxable Gains - The final amount on which CGT is calculated, after all deductions.

Mnemonic for CGT Computation

  • DIA-CAT:
    • D: Disposal Proceeds
    • I: Incidental Costs
    • A: Allowable Expenditure
    • C: Capital Losses
    • A: Annual Exemption
    • T: Taxable Gains

CGT Computation for Individuals

  • Disposal Proceeds: The initial amount received from selling an asset.
  • Incidental Costs of Disposal: Costs directly associated with the sale, such as legal fees or agent fees. These costs are deducted from the disposal proceeds.
  • Allowable Expenditure: Includes the original cost of acquiring the asset and any improvements made to it. This expenditure is subtracted from the remaining amount after incidental costs.
  • Capital Losses: Losses from previous asset disposals, either in the same tax year or from previous years, can be deducted to offset any capital gains.
  • Annual Exemption: A yearly allowance provided to individuals to reduce their taxable capital gains (e.g., £3,000 in 2024/25). This exemption is applied after capital losses.
  • Taxable Gains: The remaining amount after all deductions (disposal proceeds, incidental costs, allowable expenditure, capital losses, and annual exemption) is the taxable gain on which CGT is calculated.

Mnemonic for Individuals (DIA-CAT)

  • The mnemonic DIA-CAT helps remember the steps for calculating Capital Gains Tax (CGT) for individuals:
    • D: Disposal Proceeds
    • I: Incidental Costs
    • A: Allowable Expenditure
    • C: Capital Losses
    • A: Annual Exemption
    • T: Taxable Gains

CGT Computation for Individuals

  • The CGT computation begins with Disposal Proceeds, the total amount received from selling an asset.
  • Incidental Costs of Disposal such as legal fees or agent fees are deducted.
  • Allowable Expenditure, representing the original cost of acquiring the asset and any improvements made to it, is further deducted.
  • Capital Losses incurred in previous years or the same tax year can be offset against the gain.
  • The Annual Exemption allows individuals to deduct a certain amount from their taxable gain, reducing their CGT liability.
  • The remaining amount is the Taxable Gains, upon which CGT is calculated.

Mnemonic for CGT Calculation

  • The mnemonic DIA-CAT helps remember the order of deductions:
    • D: Disposal Proceeds
    • I: Incidental Costs
    • A: Allowable Expenditure
    • C: Capital Losses
    • A: Annual Exemption
    • T: Taxable Gains

Flashcard Questions and Answers

  • What is the starting point of the CGT computation for an individual?
    • Disposal Proceeds: The amount received from selling the asset.
  • What is deducted after disposal proceeds in the CGT computation?
    • Less: Incidental Costs of Disposal: Legal fees, agent fees, and other costs directly related to the sale.
  • What comes after incidental costs of disposal?
    • Less: Allowable Expenditure: The original cost of acquiring the asset and any costs for improvements.
  • Which losses can be deducted after allowable expenditure?
    • Less: Capital Losses: Losses from previous disposals that can offset gains.
  • What is the annual deduction available to reduce the taxable gains?
    • Less: Annual Exemption: The annual CGT allowance for individuals (e.g., £3,000 for 2024/25).
  • What is the final amount on which CGT is charged called?
    • Taxable Gains: The final amount after all deductions, on which CGT will be calculated.

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