Jim invested €10,000, including costs, in shares three years ago. If he sells the shares in July 2020 for €14,500, after disposal costs, what Capital Gains Tax liability will he have on this gain assuming he makes no other gains or losses in 2020?

• A. €1,066
• B. €1,389
• C. €1,485
• D. €1,845

Answer: (A)

Capital gains tax is charged on the gain from selling an asset after accounting for any annual exemption. The gain is net sale proceeds minus the cost base. Here the net gain before the exemption is 14,500 − 10,000 = 4,500. For 2020, the annual CGT exemption for individuals is €1,270, so the taxable gain becomes 4,500 − 1,270 = 3,230. The rate is 33%, so the tax due is 0.33 × 3,230 = €1,065.90, i.e., €1,066. The three-year holding period does not affect the CGT rate. If you forgot the exemption, the tax would be 33% of 4,500 = €1,485.