Recording a tax loss, self assessment, how?
Discussion
Not worried about my overall finances, but want to do my tax right -
I have a steady BTL income which goes on my self assessment.
I invested in the S+P for the first time 5 months ago (lol) and on paper am £3,000 down. Let's assume £3,000 down on 5th April.
I looked on previous self assessment forms but I'm confused.
Do I need to crystalize the loss (sell on 4th April, buy it all back on 5th April), to cut my tax bill next year?
I have a steady BTL income which goes on my self assessment.
I invested in the S+P for the first time 5 months ago (lol) and on paper am £3,000 down. Let's assume £3,000 down on 5th April.
I looked on previous self assessment forms but I'm confused.
Do I need to crystalize the loss (sell on 4th April, buy it all back on 5th April), to cut my tax bill next year?
You can only offset capital losses against capital gains.
Capital losses are automatically offset against capital gains of the same tax year, any loss that remains is carried forward for offset against capital gains of future tax years.
In a tax year, where you have current year and brought forward losses, the current year losses are offset against gains first. Any gain remaining will then be reduced by available brought forward losses to the point that they reduce the capital gains to the annual exempt amount.
Any claims for Capital Losses would be entered in the Capital Gains Tax section of the Self Assessment tax return
Capital losses are automatically offset against capital gains of the same tax year, any loss that remains is carried forward for offset against capital gains of future tax years.
In a tax year, where you have current year and brought forward losses, the current year losses are offset against gains first. Any gain remaining will then be reduced by available brought forward losses to the point that they reduce the capital gains to the annual exempt amount.
Any claims for Capital Losses would be entered in the Capital Gains Tax section of the Self Assessment tax return
Don't think you can sell and buy back the next day: https://www.gov.uk/hmrc-internal-manuals/capital-g...
Edited to add: there's something called the 30 day rule.
Edited to add: there's something called the 30 day rule.
Edited by trevalvole on Wednesday 19th March 09:34
When shares are sold for less than the amount originally paid for them, a capital loss arises. Unfortunately, capital losses arising on the sale of listed shares cannot be offset against income tax liabilities. Instead, they are offset against capital gains arising either in the same tax year, or in future years.
trevalvole said:
Peterpetrole said:
Ok thanks everyone -
I also have money in regular bank accounts earning interest, not in an ISA due to ISA limits -
So can I count that as a capital gain to offset my S+P loss?
No, interest is income, not capital.I also have money in regular bank accounts earning interest, not in an ISA due to ISA limits -
So can I count that as a capital gain to offset my S+P loss?
OP, worth you hiring an accountant.
The Money Saving Expert site has a pretty good forum to discuss tax and it's implication. Before you hire an accountant it may be worthwhile visiting and asking your questions.
https://forums.moneysavingexpert.com/categories/cu...
https://forums.moneysavingexpert.com/categories/cu...
There's no point crystallising a capital loss unless it's going to save you tax that would otherwise be payable. The key thing to bear in mind is that "tax deferred is tax saved", simply because of the cash flow implications.
How could it save you tax? Well, if you've already used your CGT tax free annual allowance any further capital gains will be liable to tax. Let's say you have further taxable gains of £5,000. At a 20% rate of CGT you'd get a tax bill of £1,000
OK, so sell something else in addition that crystallises a loss. Say, a loss of £3,000
Your CGT bill then becomes (£5,000 - £3,000) x 20% = £400. £600 of tax has been saved.
Well, what if the only things you've sold in the year have crystallised total losses of, say, £5,000 with no gains to offset against?
That's fine, unused losses can be carried forward to future years so long as you've filed a tax return claiming those losses.
But never forget that losses carried forward must be fully used up BEFORE you are allowed another slice of annual tax free CGT allowance. This can be a bit of a pain as you might lose the tax free annual allowance.
Juggling CGT is worthy of careful thought in any tax suppression strategy. If you own assets that are "pregnant with gains" part of the question right now is whether it's better to sell now and pay 20% CGT or to press on into the future when the rate might be 24% (or more). But equally well, the future rate might be lower...
How could it save you tax? Well, if you've already used your CGT tax free annual allowance any further capital gains will be liable to tax. Let's say you have further taxable gains of £5,000. At a 20% rate of CGT you'd get a tax bill of £1,000
OK, so sell something else in addition that crystallises a loss. Say, a loss of £3,000
Your CGT bill then becomes (£5,000 - £3,000) x 20% = £400. £600 of tax has been saved.
Well, what if the only things you've sold in the year have crystallised total losses of, say, £5,000 with no gains to offset against?
That's fine, unused losses can be carried forward to future years so long as you've filed a tax return claiming those losses.
But never forget that losses carried forward must be fully used up BEFORE you are allowed another slice of annual tax free CGT allowance. This can be a bit of a pain as you might lose the tax free annual allowance.
Juggling CGT is worthy of careful thought in any tax suppression strategy. If you own assets that are "pregnant with gains" part of the question right now is whether it's better to sell now and pay 20% CGT or to press on into the future when the rate might be 24% (or more). But equally well, the future rate might be lower...
Gassing Station | Finance | Top of Page | What's New | My Stuff