Part Disposals

Key facts

The A/(A+B) formula apportions the original cost between the part sold and the part retained.
A = disposal proceeds of the part sold; B = market value of the part retained.
Part disposals commonly arise with land, gardens, and buildings.
A “small part disposal of land” election is available if proceeds do not exceed £20,000 or 20% of the land’s value.
The remaining cost base of the retained part is the original cost minus the amount apportioned to the disposal.

When Does a Part Disposal Arise?

A part disposal occurs whenever you dispose of part of an asset while retaining the rest. This can include:^[1]

Selling a strip of land from a larger plot
Selling part of a garden to a neighbour or developer
Granting a lease (the freehold is the original asset, and the lease is a disposal of part)
Receiving a capital sum derived from an asset (e.g. compensation for damage to part of a property)
Selling some shares from a holding (though shares have their own matching rules)

The A/(A+B) Formula

When you make a part disposal, you cannot simply deduct the full original cost from the proceeds. Instead, you must apportion the cost using the formula:^[1]

Allowable cost of part disposed of = Total cost × A ÷ (A + B)

Where:
A = proceeds (or market value) of the part disposed of
B = market value of the part retained at the date of disposal

The remaining allowable cost of the retained part is: Total cost − cost allocated to the disposal.

Worked Example

David bought a plot of land in 2012 for £80,000. In 2025, he sells part of the land to a developer for £50,000. At the date of the part disposal, the remaining land is valued at £150,000.

Step	Calculation	Amount
Disposal proceeds (A)		£50,000
Market value of retained part (B)		£150,000
Fraction: A / (A + B)	£50,000 / (£50,000 + £150,000)	25%
Allowable cost of part sold	£80,000 × 25%	£20,000
Gain on part disposal	£50,000 − £20,000	£30,000
Remaining cost of retained land	£80,000 − £20,000	£60,000

When David eventually sells the remaining land, his base cost will be £60,000 (the unallocated portion of the original cost).

Enhancement Costs on Part Disposals

If you incurred improvement expenditure on the asset, it must also be apportioned:^[2]

Enhancement expenditure that relates exclusively to the part disposed of is fully deductible against the part disposal proceeds
Enhancement expenditure that relates exclusively to the part retained is not deductible on this disposal — it is preserved in the cost base of the retained part
Enhancement expenditure that relates to the whole asset (e.g. fencing around the entire perimeter) is apportioned using the A/(A+B) formula

Small Part Disposals of Land

If you sell part of a plot of land and the proceeds are small relative to the total value, you can elect for special treatment under s.242 TCGA 1992:^[3]

Small part disposal election: If the disposal proceeds are £20,000 or less and do not exceed 20% of the market value of the entire land at the date of disposal, you can elect to treat the proceeds as a reduction of the cost base rather than a part disposal. This means no CGT arises now — the gain is deferred until you dispose of the remaining land.

To make the election, note it on your Self Assessment tax return. If you do not make the election, the normal part disposal rules apply.

Example of the Election

Emma owns land worth £200,000 that she originally bought for £100,000. She sells a small strip to a neighbour for £12,000. Because £12,000 is below both £20,000 and 20% of £200,000 (£40,000), she can elect:

Approach	CGT Now	Remaining Cost Base
Normal part disposal rules	Gain of £5,660 (after A/(A+B))	£93,617
Small part disposal election	£0	£88,000 (£100,000 − £12,000)

Getting a Valuation

The A/(A+B) formula requires knowing the market value of the retained part (B) at the date of disposal. This is critical because a higher B value means a smaller fraction of the cost is allocated to the disposal, resulting in a larger gain.

In practice:

For straightforward cases, a written valuation from a RICS-qualified surveyor is advisable
HMRC may challenge the valuation — keep supporting evidence
You can agree the valuation with HMRC in advance through the HMRC Shares and Assets Valuation team

Frequently Asked Questions

What is the A/(A+B) formula?

The A/(A+B) formula apportions the total allowable cost of an asset when only part of it is disposed of. A is the disposal proceeds (or market value) of the part sold, and B is the market value of the part retained. The fraction A/(A+B) applied to the total cost gives the allowable cost for the part disposed of.

What is a small part disposal of land?

If you dispose of part of a plot of land and the proceeds are no more than £20,000 (and no more than 20% of the total value of the land at the time of disposal), you can elect to treat the proceeds as a reduction of the cost base rather than a disposal. No CGT arises until you eventually sell the remaining land.

How do I value the part I keep?

The market value of the retained part (B) should be its value at the date of the part disposal. You may need a professional valuation, particularly for land and property, as the figure directly affects how much of the original cost is allocated to the disposed part.

Can I deduct improvement costs on a part disposal?

Enhancement expenditure that relates specifically to the part disposed of is fully deductible. Enhancement expenditure that relates to the whole asset should be apportioned using the A/(A+B) formula in the same way as the original cost.

Sources

Capital Gains Manual: CG12730 – Part disposals — HMRC
Capital Gains Manual: CG71300 – Part disposal: land — HMRC
Capital Gains Manual: CG71928 – Small part disposals of land — HMRC