What Counts as a Disposal?

Key facts

Selling an asset is the most common type of disposal.
Giving away an asset is a disposal — market value is used as the deemed proceeds.
Exchanging or swapping assets is a disposal of both assets.
An asset being lost or destroyed is treated as a disposal.
Receiving a capital sum derived from an asset (such as insurance proceeds) can also trigger a disposal.

What Is a Disposal?

In Capital Gains Tax law, the word “disposal” has a broad meaning. A disposal occurs whenever you part with an asset or its value in any way. CGT can only be charged when there is a disposal — simply holding an asset while it grows in value does not trigger a tax charge.^[1]

The most common forms of disposal are listed below, but the concept is deliberately wide to prevent avoidance.

Selling an Asset

The most straightforward disposal is a sale for money. The disposal proceeds are the amount received (or receivable), and the gain or loss is the difference between those proceeds and the asset’s allowable cost base.^[2]

This includes:

Selling a property
Selling shares through a stockbroker
Selling a business or business assets
Selling personal possessions such as jewellery or art
Selling cryptocurrency on an exchange

Giving Away an Asset

If you give away an asset (a gift), CGT treats the disposal as occurring at market value at the date of the gift — even though you received nothing.^[2]

This means you may have a CGT liability on an asset you gave away for free. The gain is calculated as:

Gain on gift = Market value at date of gift − Original allowable cost

Two key reliefs can eliminate or defer the gain on gifts:

Holdover relief (s.165 TCGA 1992) — available for gifts of business assets
Holdover relief (s.260 TCGA 1992) — available for gifts into certain trusts where inheritance tax is chargeable

Spouse exemption: Gifts between spouses or civil partners who are living together are always “no gain no loss” transfers — no CGT arises and the recipient inherits the original base cost.

Exchanging or Swapping Assets

An exchange of one asset for another is a disposal of the asset you give up and an acquisition of the asset you receive. Each asset is valued at its market value at the date of the exchange.^[3]

This applies to:

Part-exchange transactions (e.g. trading in an old asset as part-payment for a new one)
Swapping shares in one company for shares in another (unless share-for-share exchange relief applies)
Exchanging cryptocurrency for a different cryptocurrency

Loss or Destruction of an Asset

An asset that is lost, destroyed, or becomes worthless triggers a disposal for CGT purposes:^[4]

Situation	Disposal Proceeds	Result
Asset destroyed, insurance received	Insurance payout amount	Gain or loss based on insurance vs cost
Asset destroyed, no insurance	Nil	Allowable loss equal to cost base
Asset lost (cannot be found)	Nil (once HMRC satisfied it is lost)	Allowable loss
Asset becomes worthless	Negligible value claim required	Deemed disposal at negligible value

If an insurance payout for a destroyed asset is used to replace the asset, rollover relief may be available so that the gain is deferred into the replacement asset rather than being charged immediately.

Receiving a Capital Sum from an Asset

A disposal can also occur when you receive a capital sum derived from an asset without actually selling or transferring it. Examples include:^[3]

Compensation or damages relating to an asset
A capital distribution from a company (other than a normal dividend)
A payment for agreeing to restrict the use of an asset (e.g. a restrictive covenant over land)
A payment for forfeiting or surrendering rights

Part Disposals

If you dispose of part of an asset (such as selling a portion of a plot of land), this is a part disposal. The cost base must be apportioned using the formula:

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

Where A = disposal proceeds of the part disposed of, and B = market value of the part retained.

What Is NOT a Disposal

The following are not disposals for CGT purposes:

Death — there is no CGT disposal on death; assets pass to the estate at market value (a CGT-free uplift)
Transfers between spouses living together — “no gain no loss”
Gifts to charities — generally exempt from CGT
Lending an asset — temporarily allowing someone to use an asset is not a disposal (but beware of some anti-avoidance rules)
Mortgaging or charging an asset as security for a loan

Disposals to Connected Persons

When you dispose of an asset to a connected person (such as a close relative, a partner, or a company you control), the disposal is deemed to take place at market value, regardless of the actual price paid.^[2]

Connected persons include:

Spouses and civil partners (though transfers between spouses living together are “no gain no loss”)
Parents, grandparents, children, grandchildren, and their spouses
Brothers and sisters, and their spouses
Business partners and their relatives
Companies controlled by the individual or their connected persons

Frequently Asked Questions

Is giving away an asset a disposal for CGT?

Yes. When you give away an asset, it is treated as a disposal at market value. CGT is calculated as if you had sold the asset for its market value at the date of the gift, even though you received nothing. Holdover relief may be available for certain business assets and gifts into trust.

Does exchanging one asset for another trigger CGT?

Yes. An exchange or swap of assets is treated as a disposal of the old asset and an acquisition of the new one. Each asset is valued at market value for CGT purposes. This includes part-exchange transactions.

Is there a CGT disposal when an asset is destroyed?

Yes. The destruction of an asset is a disposal. If you receive insurance proceeds or compensation, these are treated as the disposal proceeds. If the asset becomes negligible in value, you can make a negligible value claim to crystallise a loss.

What is a deemed disposal?

A deemed disposal occurs when CGT treats you as having disposed of an asset even though no actual sale or transfer has taken place. Examples include emigration (for certain assets), the death of the owner, and negligible value claims.

Sources

Capital Gains Tax: what you pay it on — GOV.UK
Capital Gains Manual: CG12800 – Disposals: general — HMRC
Capital Gains Manual: CG13000 – Disposals: what constitutes a disposal — HMRC
Capital Gains Manual: CG13120 – Assets lost or destroyed — HMRC