Offsetting a shares 'loss' against next years CGT

Doglover88

I've heard you can offset any losses made this year (2010-2011) on share trading, against your CGT limit for next year, is this right?

And is is only valid for the one year following any losses made?

Aegis

You can carry forward losses indefinitely, at least under present rules. I've never actually had to offset a loss, though, so I don't know the exact procedure for the offset process.

cheerfulcat

You need to inform HMRC when you make a loss. It can then be offset against any future gains. Unfortunately, IIRC, the loss is used before your CGT allowance

Aegis

cheerfulcat wrote: »

You need to inform HMRC when you make a loss. It can then be offset against any future gains. Unfortunately, IIRC, the loss is used before your CGT allowance

Only if used in the same year. Carried forward losses are only used to reduce the capital gain down to the threshold of the allowance.

cheerfulcat

Ah, yes. Hence the careful addition of " IIRC ". I obviously did not RC.

Biggles

Losses can be carried forward indefinitely, but ONLY if notified to HMRC within four years from the end of the tax year.

olbas_oil

Aegis wrote: »

Only if used in the same year. Carried forward losses are only used to reduce the capital gain down to the threshold of the allowance.

If you had a large loss this year, is it better to defer gains to the following year (try to avoid any disposals that would result in gains that offset that loss)?
Or does the fact that you are not using that years allowance make it all irrelevant? What is the best way to minimise tax, assuming that you have lots of potential gains that may take you over the allowance in future years?

Biggles

It's best to use each year's allowance if it's feasible. Example:-

Yr 1: You have £5k losses. You don't take any gains and carry the loss forward.
Yr 2: You have £25k gains. You can use your yr2 allowance and your yr1 losses, leaving you with £10k on which you will need to pay CGT (£25k-£10k-£5k).

Yr 1: You have £5k losses. You take £15k gains, leaving you liable for no CGT after your allowance (£15k-£10k-£5k).
Yr 2: You take a further £10k gains, leaving you liable for no CGT (£10k-£10k).