Claiming capital losses

gravlax

I've seen the following advice:
"If you make a capital loss it can be carried forward indefinitely and set off against capital gains. For example if you made a loss in 2010, and don’t make any capital gains until 2021, you can still set off your 2021 gains with 2010 losses. However you should plan your losses where possible, because if your gains in a year are fully covered by the annual CGT exemption (now £12,300 but reducing to £3,000 in 2024) then booking a loss will not improve your tax position, so if you can, defer booking the loss until a year when you don't have any gains. That way the loss will be available to carry forward indefinitely to use against future gains."

If you have gains that are below the GCT allowance, and also sell other investments at a loss, do you have to set off the loss against the tax-exempt gains in the same year - you can't carry the loss forward? If the loss is greater than the gains, then can the excess loss be carried forward to future years?

km1500

each tax year work out gains - losses

if gains, pay tax (or use previous year's losses)

if loss, carry forward

eskbanker

You have to tot up all (chargeable) gains and losses over the whole tax year - if this results in an overall gain then you pay it (if it exceeds the threshold) or if an overall loss then you can carry that forward.

JGB1955

Unless I'm missing something, these gains and losses have to be ACTUAL, not paper G/L.

gravlax

Thanks all.

What I wasn't sure of was the statement suggesting that you don't see any tax saving unless you time your losses to years when you have no gains. This wasn't totally accurate, because you can also save tax by timing your losses for years when you have taxable gains that are at least as much as your losses. 

EthicsGradient

gravlax said:

Thanks all.

What I wasn't sure of was the statement suggesting that you don't see any tax saving unless you time your losses to years when you have no gains. This wasn't totally accurate, because you can also save tax by timing your losses for years when you have taxable gains that are at least as much as your losses. 

I think that should be "you can also save tax by timing your losses for years when you have other taxable gains that exceed the annual allowance".

eg, with the current allowance
if you have in one tax year a capital gain of £10,000, and a loss of £5,000, you must offset the £5,000 against the £10,000 in that year; you won't pay any CGT, but if you'd just had the gain of £10,000, you wouldn't have paid any CGT anyway, so you've saved nothing.
but if you have in one year a capital gain of £20,000, and a loss of £5,000, your net gain is £15,000, so you pay CGT of 10% (if a basic rate payer) * (15000-12300) = £270. Without the loss, you'd pay 10%*(20000-12300)=£770.

But if you have no gains at all in a year, you get the option of carrying forward a loss in that year to any future year (and I think that goes for a net loss too - eg gain of £3,000, loss of £9,000 in one year gives you £6,000 you can carry forward). So if you can choose, it's best to take a loss either in a year when you have no gains at all, or when your other gains exceed the annual allowance (for best saving, when the net gain is still above the CGT allowance after the loss has been taken off). You may, of course, be able to choose when to take gains too.

Jonboy1889

Can I add another question onto this post re capital losses- do I have to put a capital loss in my self assessment? I heard it must be done within 4 years of the loss? I lost £1.2k in 19/20, I want to offset it in a couple of years.

Do I just sent a letter to HMRC as the tax year is too old to add into my tax return from back then? Or can I just add it in this year’s?

Joey2013

Can I also ask how you actually report your losses to HMRC.  Is it via self assessment form, write, email or phone HMRC. Do you have to provide all transaction calculations or just the loss figure.
Thanks in advance for all and any comments.