What costs can I deduct when calculating a capital gain?
Answered 11 March 2026
Here is a comprehensive answer on what costs you can deduct when calculating a capital gain.
What the law says
The statutory rules are set out in section 38 of the Taxation of Chargeable Gains Act 1992 (TCGA 1992). The deductions allowable from the disposal consideration are strictly restricted to the following categories:
1. Acquisition cost (s.38(1)(a))
The amount or value of the consideration, in money or money's worth, given wholly and exclusively for the acquisition of the asset, together with the incidental costs of acquisition. If the asset was not acquired but created, any expenditure wholly and exclusively incurred in providing the asset is allowable.
2. Enhancement expenditure and title defence (s.38(1)(b))
- Expenditure wholly and exclusively incurred for the purpose of enhancing the value of the asset, but only if that expenditure is reflected in the state or nature of the asset at the time of disposal; and
- Expenditure wholly and exclusively incurred in establishing, preserving or defending title to, or a right over, the asset.
3. Incidental costs of disposal (s.38(1)(c))
The incidental costs of making the disposal.
What counts as "incidental costs"?
Section 38(2) defines incidental costs exhaustively as expenditure wholly and exclusively incurred for the purposes of the acquisition or disposal, being:
- Fees, commission or remuneration for the professional services of any surveyor, valuer, auctioneer, accountant, agent or legal adviser;
- Costs of transfer or conveyance (including Stamp Duty or Stamp Duty Land Tax);
- Costs of advertising to find a seller (on acquisition) or a buyer (on disposal); and
- Costs reasonably incurred in making any valuation or apportionment required for the purposes of the CGT computation, including expenses in ascertaining market value where required.
⚠️ Interest is not allowable as a deduction under s.38, except as provided by s.40 TCGA 1992.
What is excluded?
Under s.39 TCGA 1992, any expenditure that is allowable as a deduction in computing income or profits for Income Tax purposes is excluded from the CGT deduction. Income Tax always takes priority.
Additionally, no item of expenditure can be deducted more than once (s.52(1) TCGA 1992).
HMRC guidance / practice
HMRC's Capital Gains manual confirms that s.38 is exhaustive — no other expenditure is allowable unless specifically provided for elsewhere in TCGA 1992. The underlying principle is that only clearly defined capital expenditure is allowable.
HMRC summarises the allowable categories as:
- Sums for acquiring or creating the asset;
- Expenditure for enhancing its value;
- Expenditure for establishing, preserving or defending title;
- Incidental costs of acquisition and disposal.
On incidental costs specifically, HMRC states:
- Professional adviser fees are only allowable to the extent they are directly referable to the cost of acquiring or disposing of the specific asset. Fees for general market advice, portfolio management, or investment prospects are not allowable.
- Subscriptions for periodicals or analyst publications are not allowable.
- Accountant's fees are allowable only to the extent they relate to ascertaining the market value of assets or to any apportionment for the CGT computation — fees for computing the tax liability itself are not allowable.
Key point from case law
The courts have confirmed that s.38 is "couched in cautiously restrictive terms, plainly designed to ensure that not all forms of expenditure which a businessman might think should be taken into account… are in fact permitted deductions." For example, payments made to settle a legal dispute after a disposal were held not to be deductible.
Citation sources
Introduction 1. These appeals both concern assessments to capital gains tax (“CGT”) on the disposal of land in tax year 2015-16. At the time of disposal, the land was held by the appellants in joint names. The first appellant (“JMS”) is the son of the second appellant (“JJS”). The land in question was part of the estate of JJS’s mother. Following the disposal, a dispute arose in relation to the land and the proceeds of sale between JJS and JMS on one side and various other family members on the
S37 TCGA 1992 requires that any part of the consideration for the disposal of an asset which has been either: charged to tax as income, or taken into account in computing income or profits or gains or losses of the disposer, should be excluded from a computation of a chargeable gain. Similarly, S39 TCGA 1992 requires the exclusion from allowable capital gains deductions of amounts which are: allowable in computing profits or losses of a trade etc for the purposes of Income Tax, or allowable in c
he case of the acquisition of an asset, with costs of advertising to find a seller, and b in the case of a disposal, with costs of advertising to find a buyer and costs reasonably incurred in making any valuation or apportionment required for the purposes of the computation of the gain, including in particular expenses reasonably incurred in ascertaining market value where required by this Act. 3 Except as provided by section 40, no payment of interest shall be allowable under this section. 4 An
Part II General Provisions relating to computation of gains and acquisitions and disposals of assets Chapter III Computation of gains: General provisions Allowable deductions Exclusion of expenditure by reference to tax on income. 39 1 There shall be excluded from the sums allowable under section 38 as a deduction in the computation of the gain any expenditure allowable as a deduction in computing the profits or losses of a trade, profession or vocation for the purposes of income tax or allowabl
When trustees transfer property to a person absolutely entitled to that property that person may bear the costs of the transfer. He or she can deduct the costs of the transfer on a later disposal of the property. Alternatively, he or she may allow the trustees to deduct the costs in computing their chargeable gain on the deemed disposal. In this case TCGA92/S52(1) prohibits the same deduction from being allowed twice.
ting his ability to vote or sell those shares. The Court of Appeal held he could not. The taxpayer submitted that concepts, phrases and words used in TCGA 1992 should be given a broad commercial interpretation, and that commercial common sense should prevail if a narrow or technical interpretation would conflict with it. Briggs LJ, as he then was, said as follows: 22. While I accept that the capital gains tax legislation, and words, phrases and concepts used in it, including those in s.38, are g
TCGA92/S38 It is important to remember that the taxation of Capital Gains is concerned with the gains on the disposal of assets. Only expenditure which falls into the categories defined in TCGA92/S38 may be allowed in the deduction in calculating the amount of the gain or loss on a disposal. The underlying principle is that (with certain specific minor exceptions) only clearly defined capital expenditure is allowable. Except where there is specific provision to the contrary, allowable expenditu
TCGA92/S38 defines the incidental costs of acquisition and disposal. The definition is exhaustive. No other expenditure is allowable unless specifically provided for by TCGA92 (see, for example, TCGA92/s143(6) (see CG56084). If a disposal by a company (Company A) is deemed to have been made by another company (Company B) following an election under TCGA92/S171A (CG45355), incidental costs of disposal incurred by Company A which would have been allowable if the gain had been chargeable on Company