offsetting investment losses

stunews

Hi, quick question about saving on the tax bill for this year.

I invested some cash in a fund in 2010, it nose-dived and I'm currently down (we're talking hundreds of quid).

Would it make sense to sell the fund now, to realise the losses which I can then offset against my tax bill for this year? Then I can buy the same number of shares again? Leaving me in same place with the investment but having effectively recouped the loss??

It's an ISA which complicates matters a little. But I have ISA allowance for this year for the buy back..

Is this an acceptable practice? Any links to useful articles appreciated..
Cheers,
Stu

TCA

As far as I know, you can't claim for losses on investments through your tax bill. Or we'd all be doing it. You can use losses to offset capital gains in a tax year, so your overall gains fall below the capital gains allowance (so you pay no tax), but as far as I'm aware that's it. But you're talking within any ISA so all capital gains are tax-free anyway. If you have any to realise.

Linton

Agree with TCA that you cant offset your losses against tax.

What fund is it?

dunstonh

I invested some cash in a fund in 2010, it nose-dived and I'm currently down (we're talking hundreds of quid).

Not often you see nose dived used when talking about hundreds of pounds.

It's an ISA which complicates matters a little. But I have ISA allowance for this year for the buy back..

Why would you want to do that? It achieves nothing.

Would it make sense to sell the fund now, to realise the losses which I can then offset against my tax bill for this year?

The ISA is tax free. It doesnt exist on the tax return. So, neither gains or losses get recorded. That is the point of the ISA.

grey_gym_sock

ISAs take investments outside the scope of income tax and CGT. so you won't be taxed on gains, but also can't use losses in any way.

if you had an unwrapped investment instead, a capital loss on it could only be set against capital gains, not against income. even when this applies, you do not "recoup the loss". at most, you get out of paying CGT (which you would otherwise have paid) amounting to 18% or 28% of the loss. which still leaves you bearing 82% or 72% of the loss.

IronWolf

If it is inside an ISA then you can't uses the losses to offset capital gains elsewhere.

If it wasn't wrapped in an ISA you could only use it against capital gains, not income tax. Also you would have to wait for a certain period before buying back the investment, I think its 30 days or something, otherwise it doesn't count as a capital loss. HMRC are wise to the trick

stunews

Wow you guys replied quickly..

It's a Fidelity Trust Fund. I didn't invest a huge amount, hence nose-diving amounting to hundreds.. It was my first foray into investing, and in retrospect, not a very good one!

OK, so you can only offset losses against capital gains - got it.. Plus it's an ISA so you can't offset - duly noted!

Oh well.. I learnt a fair bit today.. thanks very much for your help..

oldtoolie

To go back to your question -- should you sell your fund. Best way to look at that isn't to think about your loss but the future. Do you think it will grow in the coming years? Would you buy that fund today for future profits?

If the answer is no, then maybe you should switch to another fund while keeping the investment within the ISA tax protected wrapper. You do have to consider dealing costs if you do that. You may be able to do this within the Fidelity platform if that is what you are using.

With shares investments for the long term, it is usually better not to deal frequently. If you are an inexperienced investor it is often better to buy low cost index tracker funds and forget about trying to game the market.