Use of capital losses

By Tolley
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The following Personal Tax guidance note by Tolley provides comprehensive and up to date tax information covering:

  • Use of capital losses
  • General rules
  • Losses carried back on death
  • Anti-avoidance provisions
  • Overseas losses

If an individual sells a chargeable asset and makes an allowable loss, how can this be relieved?

First of all, since the simplification of capital gains tax from 6 April 2008, the proforma to calculate a loss is the same as the proforma to calculate a gain. See the Basic calculation principles of capital gains tax guidance note for more details. Basically, a loss arises if net proceeds after incidental costs of sale are less than the total of the acquisition costs plus any allowable enhancement expenditure.

TCGA 1992, s 16

Usually, allowable capital losses are set against chargeable gains, reducing the amount of the gain.

The only exception to this is where a loss has been made on unquoted shares, in which case the loss can be set against income. See the Losses on shares set against income guidance note for details of the conditions which must be met.

Chargeable gains in this context also include attributed gains from non-resident trusts where the individual is the settlor. Personal capital losses must be applied to personal gains first, only the excess is available to set against the attributed gain. See the Tax on UK settlors of non-resident trusts guidance note (subscription sensitive).

TCGA 1992, s 86(4); CG38535

Personal capital losses cannot be set against attributed gains from non-resident trusts where the individual is a beneficiary of the non-resident trust. See the Tax on capital payments from non-resident trusts guidance note (subscription sensitive).

CG38785

See below for discussion on the restriction of allowable losses in certain circumstances.

This guidance note does not consider the use of losses which might arise to non-UK residents on the sale of UK residential property under the non-resident capital gains tax (NRCGT) rules. For details of how these losses can be used, see the Capital gains tax charge on UK residential property

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