A claimed loss can be carried forward without limit and set against future gains. An unclaimed loss expires quietly, and most people never claim one because there was no gain that year.
Capital losses are one of the few genuinely valuable things a bad investment produces, and they are routinely thrown away. The reason is simple: in the year the loss arises there is usually nothing to set it against, so it feels like there is nothing to do. In fact that is precisely the year to act, because a loss must be claimed within a time limit and an unclaimed loss cannot be resurrected later when a gain finally appears.
How Losses Are Used
| Order | What happens |
|---|---|
| 1 | Losses of the current year are set against gains of the same year, in full |
| 2 | Any excess is carried forward |
| 3 | Brought-forward losses reduce later gains, but only down to the annual exemption |
| 4 | Anything still unused carries forward again, indefinitely |
The order is not optional, and it is why current-year losses are less efficient. Losses arising in the same year must be used in full against that year's gains even if that wastes your £3,000 annual exemption. Brought-forward losses are used only down to the exemption, preserving it. Where you have a choice about when to realise a loss, that difference is worth knowing.
Claiming Is a Positive Act
A loss is not automatically recorded because it happened. It has to be notified to HMRC, normally on a tax return, within a time limit running from the end of the tax year in which it arose. Miss that window and the loss is gone. Someone outside Self Assessment who makes a loss should still notify it — a letter setting out the disposal, the dates, the proceeds and the cost is sufficient if a return is not being filed.
Once claimed, the loss sits on your record and can be used years later. That asymmetry — strict deadline to claim, unlimited time to use — is the single most important thing to know about capital losses.
Losses People Forget They Have
- Shares in a company that has become worthless, where a negligible value claim can crystallise a loss without an actual sale.
- Funds sold at a loss during a market fall, especially where the holding was later rebought.
- Crypto disposals at a loss, including token-to-token swaps — see share matching rules for how the computation works.
- A second property or land sold for less than it cost after allowable expenses.
- Losses inside a portfolio that nobody computed because no return was filed that year.
Losses That Do Not Count
Losses on assets that are exempt from capital gains tax are not allowable — there is no loss relief on a main residence covered by private residence relief, on assets held inside an ISA or pension, or on most personal cars. Losses to connected persons are usable only against gains to the same person. And losses on shares in unquoted trading companies may qualify for a different and more generous relief against income, which is worth asking about specifically rather than assuming a capital loss is the only route.
Using Losses Deliberately
- Compute the position before 5 April, not after. Realising a loss to offset a gain is only possible while the tax year is open.
- Match the size to the gain, keeping the annual exemption intact where possible.
- Watch the 30-day rule if you intend to rebuy — repurchasing within 30 days matches the disposal against the repurchase and can neutralise the loss.
- Consider a spouse transfer. Transfers between spouses and civil partners are generally on a no gain no loss basis, so an asset can be moved to whoever has losses or an unused exemption.
- Keep a running record of claimed losses and what has been used, because HMRC will not remind you they exist.
Anyone about to leave the UK should also read CGT when you leave, since realising losses is subject to the same residence timing questions as realising gains.
Frequently Asked Questions
Do I need to claim a capital loss even if I have no gains?
Yes, and that is the year it matters most. A loss must be notified within a time limit from the end of the tax year it arose in, and an unclaimed loss cannot be used later when a gain appears.
How long can losses be carried forward?
Indefinitely, once claimed. Brought-forward losses reduce later gains down to the annual exemption, and anything unused carries forward again.
Why are current-year losses less efficient?
Because they must be set against the same year's gains in full, even where that wastes the £3,000 annual exemption. Brought-forward losses are used only down to the exemption, preserving it.
Can I claim a loss on shares in a company that failed?
Often, through a negligible value claim, which allows a loss to be crystallised without an actual sale. Shares in unquoted trading companies may also qualify for relief against income instead.
Related Guides
Keep reading with these related guides and calculators:
- Share matching rules — how disposals are computed
- Bed and ISA — where losses absorb the gain
- CGT when you leave — timing against a residence change
- Crypto and leaving — losses in a token portfolio
- Payments on account — the return losses are claimed on
Check your take home pay
See exactly what you'll earn after tax with our free calculator.
Calculate Your Take Home Pay →