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HMRC internal manual

Capital Gains Manual

Indexation: example


1 March 1983 R buys a field for £18,000.

A grant of planning permission increases its value.

1 March 1989 R sells part for £20,000. The balance is worth £120,000, so this is within the one-fifth limit of TCGA92/S242, and a claim is made, but as the proceeds exceed the consideration TCGA92/S244 applies.

  Disposal proceeds   20,000
LESS Costs   18,000
  Unindexed gain   2,000
LESS Indexation 0.351 on 18,000 6,318
  INDEXED LOSS   4,318

There is no indexation on any subsequent disposal as there is no allowable expenditure left.