How Do I Claim Losses to Offset My Capital Gains

Understanding capital losses

A capital loss occurs when you sell or dispose of an asset for less than you originally paid for it. The loss is the difference between your sale proceeds and your total allowable costs, such as purchase price, professional fees, and improvement costs.

You can only offset allowable losses against chargeable gains. Personal assets that do not qualify for CGT, such as cars or everyday household items, generally do not count.

Typical assets where losses can be claimed include:

Shares and investments outside ISAs or pensions

Second properties or buy-to-let homes

Business assets and goodwill

Valuable collectibles like art or antiques worth more than £6,000

By claiming these losses, you reduce the total taxable gain on which CGT is charged.

How offsetting losses works

Losses can be used in two main ways:

Against gains in the same tax year.
If you make both gains and losses in a single tax year, your losses are deducted first before applying your annual CGT allowance (£3,000 for 2025 26).

Carried forward to future years.
If your total losses exceed your gains, you can carry the unused amount forward indefinitely to offset against future profits.

Example

Suppose you made a £20,000 gain on shares but a £7,000 loss on another investment in the same year.
Your net gain is £13,000. After applying your £3,000 annual allowance, you would only pay CGT on £10,000.

If your losses had instead been £25,000, exceeding your gains, you would have no CGT to pay this year and could carry forward £5,000 to reduce gains in later years.

Reporting your losses to HMRC

You must report your losses to HMRC to use them. This can be done in two ways:

Through your Self Assessment tax return if you normally file one.

By writing to HMRC if you do not usually complete a return.

When reporting, include:

Details of the asset sold

Date of purchase and sale

Sale proceeds and costs

Calculation of the loss

Losses must be reported within four years of the end of the tax year in which they occurred. For example, a loss made in the 2024 25 tax year must be reported by 5 April 2029.

Once reported, HMRC will record the loss on your tax file so it can be carried forward and automatically applied in future years when you make gains.

Using carried-forward losses

Losses carried forward can be used only after applying the annual CGT allowance for that year.

Example:
If you have £10,000 of unused losses carried forward and make a £12,000 gain this year, you first use your £3,000 allowance to reduce the taxable gain to £9,000. You can then apply £9,000 of your carried-forward loss to bring the taxable gain down to zero, leaving £1,000 of loss to carry forward again.

Carried-forward losses do not expire, but they must be claimed before they can be used.

Negligible value claims

Sometimes you might hold assets, such as shares, that have become worthless but you haven’t yet sold them. In this case, you can make a negligible value claim to HMRC.

This allows you to treat the asset as if it were sold for nothing, creating an allowable loss without having to dispose of it.

To make a negligible value claim, write to HMRC or include it in your Self Assessment return, specifying:

The name of the asset

The date you acquired it

A statement confirming it is of negligible value

The date from which you want to treat it as disposed of (normally the current or previous two tax years)

If accepted, HMRC will treat the asset as sold and repurchased at zero value, allowing the loss to be offset against current or future gains.

Offset losses within a married couple or civil partnership

Losses and gains belong to the individual who owns the asset. You cannot directly transfer losses to your spouse or civil partner. However, you can transfer ownership of assets between each other before selling, as transfers between spouses are exempt from CGT.

This allows you to:

Share gains and losses between partners

Use both annual exemptions (£6,000 combined)

Ensure gains are taxed in the lower-rate taxpayer’s name

To qualify, transfers must occur before the sale and while you are both living together.

Claiming losses on unquoted shares

If you invested in unlisted trading company shares that have lost value, you may be able to claim the loss against income rather than capital gains.

This is known as Share Loss Relief. It can be more valuable because income is usually taxed at higher rates than capital gains.

To qualify:

The shares must have been issued by a trading company

You must have subscribed for the shares directly (not bought them second-hand)

The company must have become insolvent or have ceased trading

The relief lets you set the loss against your income for the current or previous year, reducing your overall tax bill.

Using losses from business disposals

If you sell a business or business asset at a loss, it can be offset against other capital gains, just like personal investments.

In some cases, you can also claim Business Asset Disposal Relief (BADR) on gains from other qualifying disposals, reducing your overall tax rate to 10%.

However, if the business asset loss relates to a non-trading asset (for example, an investment property), the loss can only offset gains from similar assets.

Keep accurate records

To successfully claim losses, you must keep detailed documentation. HMRC can request evidence to support your figures, including:

Purchase and sale contracts

Receipts for associated costs such as legal or valuation fees

Evidence of the asset becoming worthless for negligible value claims

Good record keeping ensures that claims are processed smoothly and that you can make use of carried-forward losses in future years without dispute.

Strategic tips for maximising loss relief

Review your portfolio near the end of the tax year and consider selling loss-making investments to offset gains.

Spread disposals over multiple tax years to maximise the annual allowance and manage your tax rate.

Use your partner’s allowance and tax band where possible.

Record all losses promptly, even if you don’t need them yet, so they can be carried forward.

Final thoughts

Capital losses are a powerful tool for reducing Capital Gains Tax legally. By reporting them properly and keeping detailed records, you can offset them against current or future profits and potentially save thousands of pounds.

Timing sales carefully, claiming negligible value losses, and making full use of allowances are all simple but effective strategies. If you hold complex assets such as business shares or property portfolios, professional advice can help ensure every eligible loss is claimed correctly.

With the right approach, you can turn investment setbacks into valuable tax savings that protect your future gains.