Using Capital Gains Tax losses

If you sell an asset for less than you paid for it, you would make a capital loss. As a general rule if the asset would have been liable to CGT had a gain taken place, then the loss should be an allowable deduction. 

These allowable losses are deducted automatically from gains in the same tax year. It is not necessary to make a claim for set-off of losses. However, it is possible to claim that losses are allowable, and preference be given to such losses.

If a taxpayer’s total taxable gain is still above the tax-free allowance, they can deduct unused losses from previous tax years. When unused losses remain and that cannot be set against gains of the same year, then these losses are carried forward to be set against future gains. It is only possible to use losses brought forward if net gains exceed the annual CGT exempt amount for the year.

In most circumstances, allowable losses and the annual exempt amount can be deducted in the way that is most beneficial to the individual. This will usually be against gains that are charged at the highest rate. A claim for losses does not have to be made straight away and can be made up to 4 years after the end of the tax year that the relevant asset was disposed.

Source:HM Government| 04-06-2023