The Lemon Fool

Hello,

Due to a bad investment, I am due to make a sizeable CGT loss in the current tax year.

I may be able to lessen this loss by partly crystallising a couple of good investments, but I don't really want to. It would only be to lessen my losses for the tax year, and hence become less liable for gains in future tax years, when the tax-free allowance becomes even more pitiful..

Can I use this year's loss to offset gains in future tax years, or are all tax years considered completely separate from each other?

TIA
Taurus

You can carry unused losses forward to use in future tax years. More info here: https://www.gov.uk/capital-gains-tax/losses

Yes, CGT losses can be carried forward. In fact if you are going to make a loss, it is better not to make a gain in the same year, as the losses will be automatically be set against the gains, even though some would be covered by the exempt amount, so in effect that bit of the loss is wasted*. In later years only losses sufficient to bring the gain down to the CGT allowance are used.

*Unless your chargeable gain is greater than the loss.

Eg if you have a loss of £2000 and a gain of £3000 in the same year they are netted off to give a gain of £1000. But the gain of £3000 would be exempt anyway, so the loss is wasted. If there is no gain the loss of £2000 can be carried forward to later years and is only used if net gains exceed the exempt amount. If the gain was £10,000 then £4000 would be taxable, so your £2000 loss is fully utilised to bring your tax bill down.

Thanks.

I will probably just carry forward the large loss, because to sell assets that I don't want to sell just to reduce the overall loss seems a bit pointless, and an example of the tax tail wagging the dog.

Gersemi wrote:Eg if you have a loss of £2000 and a gain of £3000 in the same year they are netted off to give a gain of £1000. But the gain of £3000 would be exempt anyway, so the loss is wasted.

Not true.

CliffEdge wrote:

Gersemi wrote:Eg if you have a loss of £2000 and a gain of £3000 in the same year they are netted off to give a gain of £1000. But the gain of £3000 would be exempt anyway, so the loss is wasted.

Not true.

As I understand it, Gersemi is totally correct here. Perhaps you could elaborate your thoughts as to why this is not so.

CliffEdge wrote:

Gersemi wrote:Eg if you have a loss of £2000 and a gain of £3000 in the same year they are netted off to give a gain of £1000. But the gain of £3000 would be exempt anyway, so the loss is wasted.

Not true.

I refer you to

https://www.gov.uk/hmrc-internal-manual ... al/cg21520

Example one shows the case where gains exceed losses and the net gain is below the exempt amount. Example 3 shows how losses carried forward are used.

Gersemi wrote:

CliffEdge wrote:Not true.

I refer you to

https://www.gov.uk/hmrc-internal-manual ... al/cg21520

Example one shows the case where gains exceed losses and the net gain is below the exempt amount. Example 3 shows how losses carried forward are used.

Thank you that is interesting.

In 2022 I sold a fund for £70000 making a capital gain of £12124.

I sold another fund for £30000 making a loss of £2000

Because these transactions exceeded £50000, and even though the gain was less than the allowance of £12300, I wrote to Capital Gains Tax Queries, HMRC, BX9 1AS, to inform them.

I wrote,inter alia, "I believe that my gain is less than the CGT allowance of £12300 so no tax is due. Would it be possible to carry the loss in (2) over to the 2023-2024 tax year?"

They replied, inter alia, "I can confirm that the capital gains loss can be carried forward". A. Person, Technical Officer.

So this is why I believed your post to be, in part, incorrect.

BW

Edge

CliffEdge wrote:
I wrote,inter alia, "I believe that my gain is less than the CGT allowance of £12300 so no tax is due. Would it be possible to carry the loss in (2) over to the 2023-2024 tax year?"

They replied, inter alia, "I can confirm that the capital gains loss can be carried forward". A. Person, Technical Officer.

So this is why I believed your post to be, in part, incorrect.

BW

Edge

The following HMRC community forum thread would seem to contradict what you've been told

https://community.hmrc.gov.uk/customerf ... 155d978126

and also this one

https://community.hmrc.gov.uk/customerf ... 155d9771aa

CliffEdge wrote:Thank you that is interesting.

In 2022 I sold a fund for £70000 making a capital gain of £12124.

I sold another fund for £30000 making a loss of £2000

Because these transactions exceeded £50000, and even though the gain was less than the allowance of £12300, I wrote to Capital Gains Tax Queries, HMRC, BX9 1AS, to inform them.

I wrote,inter alia, "I believe that my gain is less than the CGT allowance of £12300 so no tax is due. Would it be possible to carry the loss in (2) over to the 2023-2024 tax year?"

They replied, inter alia, "I can confirm that the capital gains loss can be carried forward". A. Person, Technical Officer.

So this is why I believed your post to be, in part, incorrect.

BW

Edge

I can see why you would think that I was incorrect given the response you were given. But I think that "A Person" gave you incorrect advice. It has been known for tax officials to get things wrong. Perhaps they thought the loss had arisen in another year? The advice certainly contradicts the manual and my understanding of the rules.

Gersemi wrote:[The advice certainly contradicts the manual and my understanding of the rules.

It also contradicts the act- TCGA 1992

(2)Capital gains tax shall be charged on the total amount of chargeable gains accruing to the person chargeable in the year of assessment, after deducting—
(a)any allowable losses accruing to that person in that year of assessment

genou wrote:

Gersemi wrote:[The advice certainly contradicts the manual and my understanding of the rules.

It also contradicts the act- TCGA 1992 (2)Capital gains tax shall be charged on the total amount of chargeable gains accruing to the person chargeable in the year of assessment, after deducting—
(a)any allowable losses accruing to that person in that year of assessment

That is certainly the principle I have always followed. Or to put it another way, a loss cannot be carried forward if there are realised gains in the same tax year. Rather the loss has to offset those gains for reporting purposes.

Since I always have taxable gains each year in excess of the annual CGT-free allowance, my losses simply reduce my CGT bill each year. To realise a loss in a year when I would not owe CGT anyway is effectively wasting it. And to take only losses in a year just in order to be able to roll them forward wastes the annual CGT-free allowance for that year.

Lootman wrote:

genou wrote:It also contradicts the act- TCGA 1992 (2)Capital gains tax shall be charged on the total amount of chargeable gains accruing to the person chargeable in the year of assessment, after deducting—
(a)any allowable losses accruing to that person in that year of assessment

That is certainly the principle I have always followed. Or to put it another way, a loss cannot be carried forward if there are realised gains in the same tax year. Rather the loss has to offset those gains for reporting purposes.

Since I always have taxable gains each year in excess of the annual CGT-free allowance, my losses simply reduce my CGT bill each year. To realise a loss in a year when I would not owe CGT anyway is effectively wasting it. And to take only losses in a year just in order to be able to roll them forward wastes the annual CGT-free allowance for that year.

Thank you all.

Thanks for the replies.

I do not wish to take any of my gains in this tax year, so I will carry my loss forward.

Is this loss only available to be offset for 2024/25, or can it be carried forward to further tax years, assuming no gains are crystallised in 2024/25 etc.?

And is this loss only available to be offset against a gain or gains in one tax year, regardless of the fact that any such gains might not match that loss?

The confusion has arisen I think because of the different rules for (a)losses brought forward being set off against a current year gain compared to (b)losses arising in the same year as a gain.

I had a capital loss 5 or 6 years ago due to a bad investment (Carillion) which I declared in that year’s return and have been carrying forward ever since. By the way I use the ‘Any other Information’ box (19) of the ‘Finishing your Tax Return’ page for this, is this how others carry forward losses?

I have never had a gain high enough to trouble the tax man until this year when I bed and isa’d a holding of Diageo shares which generated a gain higher than the new lowered threshold. So next year I’m going to join in the fun of declaring a gain, offsetting some of the carried-forward loss and carrying forward the remainder of the loss for future years.

TaurusTheBull wrote:Thanks for the replies.

I do not wish to take any of my gains in this tax year, so I will carry my loss forward.

Is this loss only available to be offset for 2024/25, or can it be carried forward to further tax years, assuming no gains are crystallised in 2024/25 etc.?

And is this loss only available to be offset against a gain or gains in one tax year, regardless of the fact that any such gains might not match that loss?

Any CGT loss can be carried forward indefinitely until it is used. If the taxable gain in the later year is less than the loss carried forward, then only so much of the loss needed to bring the taxable gain down to nil (ie to the level of the exempt amount) is used and any balance is carried forward until needed.

Eg loss c/f £5000.

Gain in later year £7000, exempt amount £3000, so chargeable gain is £4000. Loss of £4000 set against gain to bring it down to the limit, £3000. Balance of loss £1000 is carried forward to later years.

Hi, I'm also in a similar position. But am considering selling investments on/ before 5 April, to a) make use of tax losses, and b) utilise the (now) £6,000 cgt allowance.

As next tax year could be under Labour who may reduce the cgt allowance, ability to offset losses and increase tax rate. I'd guess CGT is the next to go up, after vat on school fees and taxing non doms. As CGT is paid by mainly the wealthy.

Adamski wrote: But am considering selling investments on/ before 5 April, to a) make use of tax losses, and b) utilise the (now) £6,000 cgt allowance.

As next tax year could be under Labour who may reduce the cgt allowance, ability to offset losses and increase tax rate. I'd guess CGT is the next to go up [...]

Another option may be to take that 10% hit this tax year, and keep your losses to offset the possible further reduced allowance/rate increase in 25/26 [*]

Don't forget that the allowance is reducing to £3,000 anyway in 24/25.



[*] Assuming the election is in late 2024, then emergency legislation would be needed to implement CGT changes before the 25/26 tax year that would involve splitting the 24/25 tax year in two - before x-date and after it. If that is the case, we may only get a few hours notice, a bit like when fuel duty used to change from 6pm on budget day.

But I cannot forsee that losses will not be able to be offset, certainly in the year they were realised. Sorry, getting a bit OT now.