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CGT (losses) on GIA share trades

Practical Issues
SoBo65
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CGT (losses) on GIA share trades

#401713

Postby SoBo65 » April 4th, 2021, 8:32 pm

I have never paid much attention to CGT as my gains outside of SIPPS or ISA's was way below the annual allowance.

For 2020/21 I made net gains of £11,465 so below the annual allowance.

However, I realise that in 2019/20 I made net losses of £31,434 and did not include within my self assessment.

Question is should I claim the carry forward losses now on basis that will be useful in future years or just ignore and kick myself for the oversight?

dealtn
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Re: CGT (losses) on GIA share trades

#401750

Postby dealtn » April 4th, 2021, 10:51 pm

SoBo65 wrote:I have never paid much attention to CGT as my gains outside of SIPPS or ISA's was way below the annual allowance.

For 2020/21 I made net gains of £11,465 so below the annual allowance.

However, I realise that in 2019/20 I made net losses of £31,434 and did not include within my self assessment.

Question is should I claim the carry forward losses now on basis that will be useful in future years or just ignore and kick myself for the oversight?


What's the downside in claiming? An hour's work maybe?

How would you feel if you lost out on a potential 4-figure tax saving in future years?

(GIA?)

Gengulphus
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Re: CGT (losses) on GIA share trades

#401760

Postby Gengulphus » April 4th, 2021, 11:36 pm

SoBo65 wrote:I have never paid much attention to CGT as my gains outside of SIPPS or ISA's was way below the annual allowance.

For 2020/21 I made net gains of £11,465 so below the annual allowance.

However, I realise that in 2019/20 I made net losses of £31,434 and did not include within my self assessment.

Question is should I claim the carry forward losses now on basis that will be useful in future years or just ignore and kick myself for the oversight?

You are able to amend your 2019/2020 tax return until 31 January next year, and if you submitted that tax return online, amending it is about as simple as submitting it in the first place. Amending it to include the capital gains section, attach your calculations of your realised gains and losses in 2019/2020 (which I assume you've already calculated, since otherwise I don't see how you would know the precise figure for your net losses!) and to enter a few summary totals into boxes in the capital gains section doesn't seem like much work for a potential future saving of £3,143-£6,286 of CGT (at current CGT rates, more if they go up in the future). Furthermore, if anyone from HMRC were to ask you why you amended your tax return (which I think is extremely unlikely), you presumably have a simple answer: you hadn't realised you had a reason to wish to claim the losses - but having since realised you do have such a reason, you're correcting the mistake.

If you submitted a paper tax return, the procedure for amending it is a bit more cumbersome (basically, send HMRC a letter saying you want to amend it and detailing the amendments you wish to make) but the potential future CGT savings still seem to me to be quite big enough for it to be well worth your while!

So basically my answer is yes, you'd be well-advised to claim the losses now, and the specific method I would choose for doing so is by amending your 2019/2020 tax return.

And just to be clear: the amended tax return should claim both the losses realised in 2019/2020 and the gains realised in 2019/2020. That will result in your net losses for 2019/2020 becoming brought-forward losses for 2020/2021, which is what you're entitled to. Don't claim the losses realised in 2019/2020 and forget to mention the gains realised in 2019/2020 - that would result in the amended return not being "complete and correct to the best of my knowledge and belief", i.e. a false declaration at the end of the amended return...

And about your 2020/2021 return, two points:

* Do pay attention to the detail that the tax return question about whether your gains are in excess of the CGT allowance, that it's about your gains before deducting losses. Unless you realised very few losses in 2020/2021, your net gains of £11,465 for the year probably consist of realised gains in excess of the CGT allowance of £12,300, offset by realised losses to bring the net losses down below the allowance. So the answer to that question is probably "Yes" - and yes, that answer will result in you having to submit the capital gains section of the tax return even though you'll end up having no CGT to pay... :-(

* Don't worry that you'll have to use up some of the losses brought forward from 2019/2020 offsetting those £11,465 of net gains for 2020/2021. That's because brought-forward losses are only taken into account after offsetting same-year losses, and (unlike same-year losses) only have to be used on offsetting gains that are still in excess of the CGT allowance. (I.e. brought-forward losses stay around until they save you money or you die - they don't get 'wasted'. This isn't an absolute rule, but the last tax year in which they could end up being 'wasted' was 2007/2008, so it's a reasonably well-established rule by now.)

Gengulphus

SoBo65
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Re: CGT (losses) on GIA share trades

#401895

Postby SoBo65 » April 5th, 2021, 4:54 pm

Gengulphus wrote:
SoBo65 wrote:I have never paid much attention to CGT as my gains outside of SIPPS or ISA's was way below the annual allowance.

For 2020/21 I made net gains of £11,465 so below the annual allowance.

However, I realise that in 2019/20 I made net losses of £31,434 and did not include within my self assessment.

Question is should I claim the carry forward losses now on basis that will be useful in future years or just ignore and kick myself for the oversight?

You are able to amend your 2019/2020 tax return until 31 January next year, and if you submitted that tax return online, amending it is about as simple as submitting it in the first place. Amending it to include the capital gains section, attach your calculations of your realised gains and losses in 2019/2020 (which I assume you've already calculated, since otherwise I don't see how you would know the precise figure for your net losses!) and to enter a few summary totals into boxes in the capital gains section doesn't seem like much work for a potential future saving of £3,143-£6,286 of CGT (at current CGT rates, more if they go up in the future). Furthermore, if anyone from HMRC were to ask you why you amended your tax return (which I think is extremely unlikely), you presumably have a simple answer: you hadn't realised you had a reason to wish to claim the losses - but having since realised you do have such a reason, you're correcting the mistake.

If you submitted a paper tax return, the procedure for amending it is a bit more cumbersome (basically, send HMRC a letter saying you want to amend it and detailing the amendments you wish to make) but the potential future CGT savings still seem to me to be quite big enough for it to be well worth your while!

So basically my answer is yes, you'd be well-advised to claim the losses now, and the specific method I would choose for doing so is by amending your 2019/2020 tax return.

And just to be clear: the amended tax return should claim both the losses realised in 2019/2020 and the gains realised in 2019/2020. That will result in your net losses for 2019/2020 becoming brought-forward losses for 2020/2021, which is what you're entitled to. Don't claim the losses realised in 2019/2020 and forget to mention the gains realised in 2019/2020 - that would result in the amended return not being "complete and correct to the best of my knowledge and belief", i.e. a false declaration at the end of the amended return...

And about your 2020/2021 return, two points:

* Do pay attention to the detail that the tax return question about whether your gains are in excess of the CGT allowance, that it's about your gains before deducting losses. Unless you realised very few losses in 2020/2021, your net gains of £11,465 for the year probably consist of realised gains in excess of the CGT allowance of £12,300, offset by realised losses to bring the net losses down below the allowance. So the answer to that question is probably "Yes" - and yes, that answer will result in you having to submit the capital gains section of the tax return even though you'll end up having no CGT to pay... :-(

* Don't worry that you'll have to use up some of the losses brought forward from 2019/2020 offsetting those £11,465 of net gains for 2020/2021. That's because brought-forward losses are only taken into account after offsetting same-year losses, and (unlike same-year losses) only have to be used on offsetting gains that are still in excess of the CGT allowance. (I.e. brought-forward losses stay around until they save you money or you die - they don't get 'wasted'. This isn't an absolute rule, but the last tax year in which they could end up being 'wasted' was 2007/2008, so it's a reasonably well-established rule by now.)

Gengulphus


Thanks for the detailed response Gengulphus, I will do as suggested.


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