When a disposal happens for capital gains

For capital gains tax, an asset sold under an unconditional contract is disposed of on the date the contract is made, not the date it is completed or transferred. That date fixes the tax year, the annual exempt amount and the rate. If the contract is conditional, the disposal happens when the condition is satisfied instead.

What does the law say about the date of disposal?

The rule is in section 28 of the Taxation of Chargeable Gains Act 1992 (TCGA 1992). Section 28(1) says that where an asset is disposed of and acquired under a contract, the time of the disposal and acquisition is the time the contract is made, and not, if different, the time at which the asset is conveyed or transferred. Section 28(2) adds that if the contract is conditional, and in particular if it is conditional on the exercise of an option, the time of disposal is the time when the condition is satisfied.

HMRC’s Capital Gains Manual at CG14250 explains why the date is so important. It decides the tax year, or for a company the accounting period, in which the gain arises, and so it can affect the deadline for declaring the disposal, the rate of tax, the date the tax is due, which year’s annual exempt amount is available, and whether the gain is taxable at all if the seller’s residence status changes from one year to the next.

Why is the contract date used rather than completion?

Once an unconditional contract is made, the bargain is struck. The price is fixed and both parties are bound, even though legal title passes later. Section 28 treats that moment as the disposal so that the gain belongs to the year in which the commercial decision was made. In a typical property sale in England and Wales the binding contract is made on exchange, and completion follows some weeks later.

The rule only operates once there is an actual disposal. HMRC’s example at CG14261 describes a contract that the parties agree to cancel before anything is transferred: although there was a contract, there was no disposal, so section 28 never comes into play and there is no gain to report.

A contract does not have to be written to count. CG14261 notes that an oral contract may be unenforceable but can still be a contract of disposal for capital gains purposes, citing Thompson v Salah [1972]. Property is different: CG70280 explains that from 27 September 1989 the Law of Property (Miscellaneous Provisions) Act 1989 requires a contract for the disposal of an interest in property in England and Wales to be made in writing, with narrow exceptions such as short leases at full market rent of less than 3 years and sales at public auction.

Illustration: exchange and completion in different tax years

Illustration only. Sam exchanges unconditional contracts to sell an investment flat on 20 March 2026 and completes on 17 April 2026.

Question	Answer	Why
Which tax year is the gain in?	2025 to 2026	Section 28(1) uses the exchange date
Which annual exempt amount can be used?	The 2025 to 2026 amount	It follows the tax year of disposal
When does the 60 day UK property return clock start?	17 April 2026	GOV.UK counts the 60 days from completion
When does ownership end for private residence relief?	17 April 2026	CG64923 uses completion dates

So Sam’s gain belongs to the earlier tax year and is reported on that year’s Self Assessment return, but the separate UK property return and payment run from completion. GOV.UK states that tax on UK residential property must be reported and paid within 60 days of completing the sale, and the online service asks for both the exchange date and the completion date. See the 60 day property return for how that return works.

When is a contract conditional?

CG14261 says a contract is conditional where there is a condition precedent, referring to Eastham v Leigh London and Provincial Properties Ltd [1971] and Lyon v Pettigrew [1985], and stresses that this is a question of contract law rather than tax law. Under the law of England and Wales a condition precedent exists, broadly, where the contract only becomes legally binding once the condition is fulfilled.

That has to be distinguished from obligations the parties must perform before completion, sometimes called conditions subsequent. If the contract binds both sides from the moment it is made, the disposal date is that date even though things remain to be done before completion.

A true condition precedent moves the disposal date to the day the condition is met. For example, if a contract for the sale of a development site states that neither party is bound until planning consent is granted, the disposal would happen when consent is granted, not when the contract was signed. The wording of each contract decides the point. Where there is serious doubt, or the contract is governed by the law of another country, HMRC’s own staff are told to seek specialist help, which is a sign that advisers should read the contract itself rather than rely on how the parties describe it.

Which disposals have a different statutory date?

CG14250 lists situations where statute fixes the date instead of section 28, or where there is no contract at all:

• Gifts and other disposals without a contract happen when the asset is actually transferred.
• Capital sums derived from assets under section 22, such as insurance or compensation receipts, have their own timing rules; see capital sums from assets.
• An asset entirely lost or destroyed is disposed of when that happens (section 24(1)).
• A negligible value claim takes effect when HMRC receives the claim, or at an earlier time specified in it (section 24(2)); see negligible value claims.
• Compulsory purchase follows section 246; see compulsory purchase and CGT.
• Under a hire purchase agreement the disposal is at the start of the hire period (section 27).
• Trust property passing to a beneficiary is disposed of when the beneficiary becomes absolutely entitled (section 71(1)).
• A capital distribution is disposed of on the date of receipt or entitlement (section 122(1)).

Options have their own pattern. The grant of an option is itself a disposal under contract, so section 28 applies to it. When an option to buy is exercised, section 144 treats the grant and exercise as a single transaction, and the relevant contract is the contract of sale formed on exercise. See options and capital gains tax.

Can the contract date apply for some purposes and completion for others?

Yes. CG14261 says the chargeable period always follows the section 28 date unless another statute overrides it, but some rules look at actual ownership. The clearest case is private residence relief: CG64923 says the period of ownership for that relief generally starts on completion of the purchase and ends on completion of the sale. A seller who moves out between exchange and completion should therefore measure occupation against completion dates, using the final period exemption where needed; see private residence relief.

The same manual page flags interactions with the market value rule, connected person transactions, allowable expenditure and rollover relief. The safe practice is to record exchange and completion dates separately for every property and business sale, because different parts of the computation may need different dates.

Can the government override the contract date when rates change?

It can, and has. The policy paper on the Autumn Budget 2024 changes to Capital Gains Tax rates explained that unconditional contracts entered into before 30 October 2024 but completed after that date would be taxed at the new rates unless the parties could show the contract was not entered into to obtain a tax advantage from the timing rule in section 28, or, for connected parties, that it was entered into for wholly commercial reasons. A statement was required where the gain exceeded £100,000. Similar rules applied to Business Asset Disposal Relief and Investors’ Relief where a contract was made between 30 October 2024 and 5 April 2026 and completed from 6 April 2025.

The lesson for future rate changes is that exchanging early to lock in an old rate may be blocked by specific anti forestalling rules, so section 28 should never be assumed to be the last word when a change has been announced.

What are the common mistakes?

• Reporting a gain in the year of completion when exchange happened before 6 April. The gain then sits in the wrong year, with the wrong exempt amount and possibly the wrong rate.
• Assuming the 60 day UK property deadline runs from exchange. It runs from completion.
• Treating every pre completion obligation as a condition. Only a condition precedent delays the disposal date.
• Using exchange dates to measure private residence relief, when HMRC uses completion.
• Forgetting that a contract which is rescinded before completion means there was no disposal, so nothing should be reported for it.

For the computation that follows once the date is settled, see how capital gains tax is calculated.

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Related Accountapedia entries

• Do you need a 60 day return if no CGT is due
• BADR on assets sold after a business stops trading
• Capital gains tax for trustees
• Selling a second home: capital gains tax
• Should executors sell assets or pass them on first

Sources

• legislation.gov.uk: Act 1992 c. 12, section 28
• GOV.UK: Manual page CG14250
• GOV.UK: Manual page CG14261
• GOV.UK: Manual page CG64923
• GOV.UK: Manual page CG70280
• GOV.UK: If you sold a property in the uk on or after 6 april 2020
• GOV.UK: Capital gains tax rates of tax

Reviewed by Christine Anderson, Broker, Solar Protect. Last reviewed 8 October 2026. Part of Accountapedia, the Solar Protect guide to UK tax and accounting. This page is general information, not personalised advice.