How to Use Capital Losses to Reduce Your UK Tax Bill

Making a loss on an investment is never the plan. But when it happens, those losses have real value — they reduce your future Capital Gains Tax bills. Here’s how to make sure you don’t waste them.

How loss offset works

Capital losses are set against gains in a specific order:

Same-year losses first. Losses from disposals in the current tax year automatically offset gains in the same year. You don’t need to do anything special — they net off.

Brought-forward losses next. If you have unused losses from previous years, you can use them — but only to reduce the current year’s net gains down to the annual exempt amount (£3,000). You can’t waste brought-forward losses by using more than necessary.

This distinction matters. Current-year losses are used in full, even if they reduce your gains below £3,000. Brought-forward losses are only used to the extent needed.

Example

Tom has £8,000 of gains and £2,000 of losses in 2025/26. He also has £10,000 of losses carried forward from 2024/25.

Step 1: Current-year losses offset gains. £8,000 − £2,000 = £6,000 net gain.

Step 2: Brought-forward losses reduce to the exemption. £6,000 − £3,000 = £3,000 of brought-forward losses used.

Step 3: Taxable gain = £6,000 − £3,000 = £3,000. Then subtract exemption: £3,000 − £3,000 = £0 tax.

Step 4: Remaining brought-forward losses: £10,000 − £3,000 = £7,000 still available for future years.

Claiming losses — the deadline

To carry forward a loss, you must report it to HMRC within four years after the end of the tax year in which the loss occurred. Miss this deadline and the loss is gone forever.

For losses in 2025/26: the deadline is 5 April 2030.

Once claimed, losses carry forward indefinitely — there’s no expiry. But you must have reported them within the four-year window to claim them.

Loss harvesting strategy

If you’re sitting on investments that are underwater and you have gains to offset, deliberately selling loss-making holdings can be smart — this is sometimes called “loss harvesting” or “tax-loss selling”.

Watch the 30-day rule: if you sell and rebuy the same shares within 30 days, the loss gets matched to the repurchase instead of creating an allowable loss. Wait 31 days, or rebuy inside an ISA to avoid this.

You can also sell the loss-making investment and buy a similar (but not identical) one immediately. For example, sell a FTSE 100 tracker and buy a FTSE All-Share tracker. They’re different securities, so the 30-day rule doesn’t apply.

Check your unrealised positions with TaxBull’s sell simulator to see which ones would create useful losses if sold before the tax year ends.

This content is for informational purposes only. Tax planning strategies should be discussed with a qualified professional before implementation.