Capital Gain losses and carry forward.

talexuser

With ISA and pension filled I have to have unwrapped ITs and ETFs.

The past 2 tax years I have sold gains just under the allowance in order to rebase and bought equivalent but different funds.

If the market remains flat till April I will have an unwrapped loss for the first time this tax year, mainly because I did a lot of rebalancing putting high dividend stuff in the ISA, and somewhat more asset protection ITs unwrapped, earlier during the year before the downturn.

I have no reason to rebase this tax year because of the loss, just wait for recovery, but how do I carry forward the loss since I'm not self assessment, just paye?

Do I write to HMRC at the end of the tax year? And if the market is flat during this year, can I still carry forward the loss to the tax year after that? It would mean a larger rebase possible when the market recovers since could sell and buy back a larger allowance than the default amount eventually? How many tax years can you carry forward a loss? Thanks.

Tom99

You can write to HMRC up to 4yrs after the asset is sold.
https://www.gov.uk/capital-gains-tax/losses
You can use that carry forward loss to offset gains above the annual allowance in future years.

talexuser

So if I don't sell anything this year, I can't carry over any loss, only if I sell something and actually make a loss?

So presumably I need to write to them about any crystallised loss at the end of the tax year to be able to use that amount in future?

bowlhead99

talexuser wrote: »

So if I don't sell anything this year, I can't carry over any loss, only if I sell something and actually make a loss?

If you haven't sold something for less than you paid for it, you haven't made a loss.

Selling something for less than you paid to buy it, is how a capital loss is made. Selling something for more than you paid to buy it, is how a capital gain is made. If nothing was sold, there can't be a capital gain or capital loss (subject to exceptions for deemed disposals like giving the shares to close family members, which presumably don't apply here).

If you haven't made a loss, you can't carry it forward, because there's nothing to carry. Still, you have said that you did have a loss this year, due to your unwrapped rebalancing activity .

So presumably I need to write to them about any crystallised loss at the end of the tax year to be able to use that amount in future?

Yes, if after offsetting your crystallised losses from this year against your crystallised gains from this year there is a net crystallised loss for 2018/9; and you want to be able to use those crystallised net losses in the next possible tax year, you will have to report those losses for this year.

You will only have carried forward tax losses available to use in some future year, if you have told HMRC that they exist. Writing a letter is fine if you're not doing a tax return for other purposes.

londoninvestor

talexuser wrote: »

How many tax years can you carry forward a loss? Thanks.

There's no limit - though I suppose the rules could be changed in future.

talexuser

Thank you for that excellent clarification. I was confusing uncrystallised with crystallised.

The losses from rebalancing at this moment in time are around 1.4k, but the gains from rebalancing around 6k - so no declarations! Uncrystallised losses with the portfolio still 3.9% down from September are naturally larger.

All my unwrapped experience so far has been in rising markets, and for the past 2 years I have sold up to my CTG allowance to rebased funds, calculating the relatively small costs in dealing (and sometimes stamp duty) were worth it to keep down future CTG calls in the event of a large sale. So a correction is a learning experience outside the ISA. By April I may sell and buy again some more just to use up more of the allowance on the best performers. I don't see any point in selling at a loss just to increase future CTG allowances.

masonic

talexuser wrote: »

All my unwrapped experience so far has been in rising markets, and for the past 2 years I have sold up to my CTG allowance to rebased funds, calculating the relatively small costs in dealing (and sometimes stamp duty) were worth it to keep down future CTG calls in the event of a large sale. So a correction is a learning experience outside the ISA. If there is a recovery and no losses by April I shall probably sell and buy again to use up the allowance.

Don't forget it doesn't count as a disposal for CGT if you buy the same investment again within 30 days.

Since you have an ISA, there is nothing to stop you selling one investment unwrapped and a different investment within the ISA and swapping them between accounts.

talexuser

Yes, the 30 day rule was the first thing I learnt here! and the ISA swap is a very good idea. So far I swapped funds for a similar equivalent eg Alliance for F&C. The rebalancing was to put the highest dividend stuff inside the ISA, on the basis it might be better for CTG purposes in the long term than have them unwrapped.