When dealing with capital gains tax (CGT), most people think about selling a whole asset, such as an entire property or a piece of land. But sometimes, only part of an asset is sold. This is called a part disposal, and it has its own set of rules under the Taxation of Chargeable Gains Act (TCGA 1992).
Below, we’ll break down how part disposals work, the impact of enhancement expenditure, and the special treatment of ‘small’ disposals, with clear examples to show the calculations.
What is a Part Disposal?
A part disposal occurs when only part of an asset is sold. Land is the most common example, as it can be divided into sections and sold off gradually. By contrast, indivisible assets like paintings or single buildings rarely fall under these rules.
When only part of an asset is sold, you can’t deduct the entire original cost in your CGT calculation. Instead, you apply the following steps to work out the allowable cost, as per example.
Example 1 – Selling Part of a Field
In June 2016, Adam bought 20 acres of farmland for £60,000. In March 2026, he sold 5 acres for £30,000. At that time, the remaining 15 acres were worth £90,000.
Step 1 – Allocate original cost
60,000 × 30,000/(30,000+90,000) = 15,000
Step 2 – Calculate gain
Proceeds (30,000) – Cost (15,000) = £15,000
Step 3 – Base cost of remainder
60,000 – 15,000 = £45,000
Adam’s taxable gain = £15,000, and the base cost of his remaining 15 acres is £45,000.
Interaction with Enhancement Expenditure
What happens if the taxpayer has spent money enhancing the land or asset?
– If the expenditure increased the value of the whole asset, only part is deductible.
– If it was spent specifically on the part being sold, the full amount is deductible.
Example 2 – Enhancing Land Before Sale
Charlotte bought 120 acres in July 2013 for £150,000. In 2014, she spent £40,000 on improvements to the entire field. In 2016, she spent £12,000 improving just Plot 1.
In October 2025, she sold Plot 1 for £420,000, when the other plots were worth £330,000.
Step 1 – Allocate original cost
150,000 × 420,000/(420,000+330,000) = 90,000
Step 2 – Allocate whole-asset enhancement
40,000 × 420,000/(420,000+330,000) = 24,000
Step 3 – Deduct specific enhancement
= £12,000 (full amount)
Step 4 – Calculate gain
Proceeds (420,000) – (90,000 + 24,000 + 12,000) = £294,000
Charlotte’s gain = £294,000.
Small Part Disposals of Land
Sometimes, selling part of the land won’t trigger an immediate CGT bill if it qualifies as a small disposal under s.242 TCGA 1992.
This applies only if:
1. The proceeds are ≤ 20% of the total land value at the time of sale, and
2. The total proceeds from land disposals in that tax year are ≤ £20,000.
If both are satisfied, the taxpayer can claim relief so that:
– No gain is taxed in that year, and
– The sale proceeds instead reduce the base cost of the remaining land (making the eventual gain larger).
Example 3 – Small Disposal Claim
In February 2013, Brian bought a paddock (10 acres) for £28,000. In April 2020, he sold one acre for £9,000. At that time, the remaining 9 acres were valued at £81,000. This was his only land sale that year.
– Check conditions:
– £9,000 is less than 20% of £90,000 → condition met.
– Total disposals in year = £9,000 (< £20,000) → condition met.
Brian makes a s.242 claim.
– No tax in 2020.
– Instead, his base cost is reduced:
28,000 – 9,000 = 19,000.
Example 4 – Final Sale After a Small Disposal
In August 2025, Brian sold the remaining 9 acres for £115,000.
Base cost = £19,000 (original £28,000 less the £9,000 already deducted).
Gain
Proceeds (115,000) – Base cost (19,000) = £96,000
Brian only pays CGT once—on the final sale in 2025—with a gain of £96,000.
Final Thoughts
Part disposals are a crucial area in CGT, especially with land sales. The key points to remember are:
– Use the A / (A + B) formula to allocate costs.
– Enhancement expenditure must be split carefully between whole-asset and specific improvements.
– Small disposals can be ignored at the time of sale, but they reduce the base cost for the future.
By understanding these rules—and applying them through clear calculations—you can ensure the correct tax treatment, whether selling part of a field today or the rest of it years later.
Please note that this relief is NOT automatic, the taxpayer must make a claim in their return.
