💸 What Is a Capital Loss? How It Works and Why It Matters

Capital loss is something every investor or business owner may encounter at some point. Understanding how it works can help you legally reduce your tax bill and make smarter financial decisions.

📉 What Is a Capital Loss?

A capital loss occurs when you sell a capital asset (like shares, property, or crypto) for less than what you paid for it.

Example: You bought shares for £10,000 and sold them for £7,000. You’ve made a £3,000 capital loss.

🧾 When Can You Use a Capital Loss?

Capital losses can be used to offset capital gains. This means if you made a profit on other investments, you can reduce your taxable gain using your loss.

Scenario:
• Gain on Property: £12,000
• Loss on Shares: £3,000
• Taxable Gain = £9,000

🔁 Carrying Forward Capital Losses

Didn’t make any capital gains this year? No problem. You can carry forward unused capital losses indefinitely to use in future years—but only if you report them to HMRC.

📌 Important: You must declare the capital loss on your Self Assessment tax return within 4 years from the end of the tax year.

❗ Common Mistakes to Avoid

1. Not reporting the loss – Even if you don’t owe tax, always report it to keep your loss record valid.
2. Confusing capital and revenue losses – Only capital losses can offset capital gains.
3. Not keeping records – Always keep purchase and sale documents.

🔍 What Can You Claim Capital Losses On?

✅ Stocks and shares
✅ Investment properties
✅ Cryptocurrency
✅ Business assets
❌ Personal possessions under £6,000 (e.g. clothes or furniture)

🧠 Smart Tip from a Tax Expert

If you’re about to sell an asset at a gain, review previous years for unused capital losses. They could significantly reduce your tax bill—or wipe it out completely!

📞 Need Help?

If you’re unsure how to report your capital losses or want help planning your tax strategy…

📞 Call 0333 880 8600
📧 Email: Tax@TaxesDoneRight.co.uk