This outcome is about knowing which disposals by an individual are outside CGT and how the chattels rules limit gains and losses. The examiner likes it because the tests are short and numerical, and one misread condition gives the wrong answer.
The rule
Exempt assets include cars, wasting chattels (life of 50 years or less) unless capital allowances were or could have been claimed, gilts, qualifying corporate bonds, ISAs and National Savings certificates. A non-wasting chattel sold for £6,000 or less is exempt. If proceeds exceed £6,000, the gain is the lower of the actual gain and 5/3 × (proceeds − £6,000). If proceeds are below £6,000 and there is a loss, use deemed proceeds of £6,000 to calculate the allowable loss.
Worked example
In 2025/26 Ms Lee sells three items.
1. A racehorse (wasting chattel, no capital allowances) for £40,000: exempt, whatever the price.
2. A painting bought for £3,000 and sold for £7,800. Proceeds exceed £6,000, so it is chargeable. Actual gain = £7,800 − £3,000 = £4,800. Maximum gain = 5/3 × (£7,800 − £6,000) = £3,000. The chargeable gain is the lower figure, £3,000.
3. A vase bought for £7,500 and sold for £4,000. Use deemed proceeds of £6,000. Allowable loss = £7,500 − £6,000 = £1,500, not £3,500.
Remember: the £6,000 test looks at proceeds, never cost, and it does not apply to wasting chattels, which are exempt at any value unless capital allowances were claimed.
Where candidates lose marks
Applying the 5/3 restriction to a loss; losses use deemed proceeds of £6,000 instead.
Treating a wasting chattel as exempt even though capital allowances were claimed, such as plant used in the business.
Using the £6,000 limit for wasting chattels, or forgetting the 5/3 multiplier and deducting only £6,000 from proceeds.
Using cost rather than proceeds to decide whether the chattel exemption applies.
Try it: 4 questions
In 2025/26 Ms Hart, a sole trader running a mobile game studio, sells three items, each at a gain: a racehorse (a wasting chattel, no capital allowances claimed) for £40,000; a painting for £20,000; and a machine used in her business for £9,000, on which she claimed capital allowances. Which of the following correctly describes the CGT treatment?
Answer: A. Wasting chattels (expected life of 50 years or less) are exempt regardless of value, unless capital allowances were or could have been claimed. The racehorse is therefore exempt. The painting is a non-wasting chattel sold for more than £6,000, so it is chargeable (subject to the 5/3 restriction). The machine is plant on which capital allowances were claimed, so the wasting chattel exemption is denied and it is chargeable. B wrongly exempts the machine. C wrongly applies the £6,000 limit to wasting chattels. D wrongly treats the painting as a wasting chattel.
Mr Okafor is a partner in a veterinary practice. In 2025/26 he sells a non-wasting antique chair, which is not used in the business, for £7,800. He bought it for £3,000. Which TWO of the following statements are correct?
Select the two that apply (each shows on its own).
Answer: A, D. A non-wasting chattel sold for more than £6,000 is chargeable, but the gain cannot exceed 5/3 × (proceeds − £6,000). Actual gain = £7,800 − £3,000 = £4,800. Restricted gain = 5/3 × (£7,800 − £6,000) = 5/3 × £1,800 = £3,000. The gain is the lower, £3,000, so statements A and D are correct. B ignores the 5/3 restriction. C is wrong because the exemption depends on proceeds not exceeding £6,000, not on cost. E deducts £6,000 from proceeds but omits the 5/3 multiplier.
Mr Ellis, who owns a car parts maker, sold a non-wasting chattel for £4,000 in 2025/26. He had bought it for £7,500. His adviser has claimed an allowable loss of £3,500. Which of the following correctly identifies the error and the correct allowable loss?
Answer: A. Where a chattel is sold for less than £6,000, the loss is calculated using deemed proceeds of £6,000. Allowable loss = £7,500 − £6,000 = £1,500. B uses actual proceeds and ignores the rule. C wrongly treats chattel losses as non-allowable when proceeds are under £6,000; only the gain is exempt, and a loss is still allowable but restricted. D wrongly applies the 5/3 gain restriction to a loss.
Ms Lowry is a director of Stagelight Co. In 2025/26 she makes these disposals: a vintage Bentley car (gain £40,000), UK government gilts (gain £6,000), a holiday cottage (gain £30,000) and shares in a quoted trading company (gain £9,000). Which disposals are chargeable assets for CGT?
Answer: A. Private motor cars and UK government gilts are exempt assets, so gains on them are not chargeable. The holiday cottage (land) and the quoted shares are chargeable assets. Chargeable gains are therefore £30,000 + £9,000 = £39,000, before the annual exempt amount. Option B wrongly treats the car as chargeable because of its high value or collector status; the car exemption applies whatever the value. Option C wrongly treats gilts as chargeable. Option D wrongly includes the car and omits the quoted shares.
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It is tangible movable property with an expected useful life of 50 years or less, such as a racehorse. It is exempt whatever the proceeds, unless capital allowances were or could have been claimed on it.
How do you calculate the gain on a chattel sold for more than £6,000?
Calculate the actual gain (proceeds less cost). Then calculate 5/3 × (proceeds − £6,000). The chargeable gain is the lower of the two.
Are chattel losses allowable if the sale proceeds are under £6,000?
Yes, but the loss is restricted. Proceeds are deemed to be £6,000, so the allowable loss is cost less £6,000. If cost is £6,000 or less, there is no allowable loss.