Example

Worked example

What the company sold: land buildings; Date bought: 1 June 2008; Purchase price: £250,000; Date sold: 30 June 2026; Sale price: £420,000. Enter your own details to replace this example.

A property bought on 1 June 2008 for £250,000 and sold on 30 June 2026 for £420,000 makes a gain of £170,000 before indexation. Indexation allowance, frozen at December 2017 (factor 0.283), is £70,750, so the company's chargeable gain is £99,250. At 25% Corporation Tax that is about £24,812.50 (£18,857.50 at 19%).

Sale price

£420,000

Less purchase price and buying costs

£250,000

Gain before indexation

£170,000

Indexation factor for June 2008 (RPI 216.8 to 278.1 in December 2017)

0.283

Indexation allowance

£70,750

Chargeable gain

£99,250

Illustration: Corporation Tax at 25%

£24,812.50

Illustration: Corporation Tax at 19%

£18,857.50

• Indexation factor = (RPI for December 2017, or the month of sale if earlier, minus RPI for the month the money was spent) divided by RPI for that month, rounded to 3 decimal places. Each factor is applied to its own cost, including any improvement.
• Indexation stopped at December 2017 (TCGA 1992 s.54, FA 2018 s.26).
• It assumes a straightforward sale of the whole asset in the UK, in pounds, to someone not connected with the company, with the full price fixed at the sale, no relief claimed (such as rollover relief) and the asset not received from a group company.
• For land and buildings it also assumes the company sold its whole interest, any lease had more than 50 years left, and, if the sale makes a loss, no capital allowances were claimed on the building or its fixtures (they would restrict the loss).
• The tax figures are an illustration: the rate depends on the company's total taxable profits (19% up to £50,000, 25% over £250,000, marginal relief in between). Taxley's Corporation Tax calculator works out the full bill: https://taxley.co.uk/corporation-tax-calculator.
• Not covered: shares bought at different times (share pooling), the substantial shareholding exemption, rollover relief, part disposals, assets owned since before 1987 (including March 1982 rebasing), other kinds of asset, and property bought to sell as trading stock.

Sources: GOV.UK: Work out a chargeable gain (Corporation Tax when you sell business assets) · GOV.UK: Indexation allowance – December 2017 · legislation.gov.uk: TCGA 1992 s.53 (indexation allowance can't create or increase a loss) · legislation.gov.uk: TCGA 1992 s.54 (calculation of indexation allowance)