Indexation Allowance

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Indexation was introduced to ensure that gains caused only by inflation were not taxed. It only applies for assets you held at some point between 01 April 1982 and 5 April 1998.

For assets sold after 5 April 1998, you will get indexation allowance up to that date and you may also get taper relief from then until you sold it.

You cannot use indexation to increase a loss or turn a gain into a loss. It will just reduce the gain to nil.

This can be complicated and if you want some help please contact the Revenue.

To work out indexation you need to use the reference table to find the factor relevent to your date of purchase, You then need to multiply your purchase cost (including any costs of purchase) by this factor. The reference table can be downloaded here.

30th April 2008 UPDATE

Under the latest CGT rules (see Article on CGT) there is now no indexation in calculating capital gains.