CG10243 - Capital Gains Tax: indexation allowance

TCGA92/S53

Indexation allowance was introduced by FA82 following a period of high inflation. The allowance gave relief for the effects of inflation (from March 1982) in computing gains. For disposals between 6 April 1985 and 29 November 1993, it was possible for indexation relief to create or increase a capital loss . For disposals on or after 30 November 1993, this was no longer allowed and the most that indexation could achieve was to reduce a gain to nil, see CG17700+

NOTE. If a taxpayer is within the charge to Capital Gains Tax, neither indexation allowance nor taper relief apply to disposals of assets on or after 6 April 2008. Previously indexation allowance had been frozen at April 1998. Companies and other concerns within the charge to Corporation Tax are not affected by these changes. For indexation allowance see CG17207+ and for taper relief see CG17895+.

CGT Simplification, including a single rate of CGT applies for disposals on or after 6 April 2008. As part of CGT Simplification, frozen indexation and taper relief are not available for such disposals.

CGT Simplification does not apply to companies who pay corporation tax on their chargeable gains. They continue to be entitled to indexation allowance.