Carrying Forward Capital Losses

Capital losses that cannot be used in the tax year in which they arise can generally be carried forward indefinitely and set against capital gains in future tax years. However, the loss must first be reported to HMRC within the applicable time limit.

Key Points

• Unused allowable capital losses can generally be carried forward indefinitely until they are used.

• A capital loss must normally be reported to HMRC within 4 years after the end of the tax year in which the disposal giving rise to the loss occurred.

• Current-year losses must be deducted from current-year gains, even if this reduces the gains below the Annual Exempt Amount (AEA) and therefore wastes some or all of the AEA.

• Brought-forward losses are more flexible: they are used only to the extent necessary to reduce the year's net gains to the AEA.

• A loss must be reported to HMRC within the relevant time limit if it is to be preserved for future use.

• For most individuals, the Annual Exempt Amount is £3,000 for 2026/27, although there are circumstances in which an individual may not qualify for an AEA.

How Carrying Forward Works

If your allowable capital losses in a tax year exceed your chargeable gains for that year, the unused losses can generally be carried forward.

Once properly reported, those losses remain available for use against gains in future tax years until they are used, subject to any special restrictions applying to particular types of loss.

The normal order is:

1. Start with chargeable gains for the tax year.

2. Deduct allowable losses arising in the same tax year. These losses must be used even if they reduce net gains below the AEA.

3. Consider any unused losses brought forward from earlier years. If the remaining net gains exceed the AEA, use brought-forward losses only to the extent necessary to reduce those gains to the AEA.

4. Deduct the AEA from the remaining net gains to determine the amount chargeable to Capital Gains Tax.

   
   

This means brought-forward losses are preserved wherever possible rather than being used unnecessarily against gains that would already be covered by the AEA.

Current-Year vs Brought-Forward Losses

Feature	Current-Year Losses	Brought-Forward Losses
Must be used against gains?	Yes	Only where net gains exceed the AEA
Can reduce gains below the AEA?	Yes	Normally no
Can therefore waste the AEA?	Yes	Normally no
Choice over amount used?	No — current-year losses are deducted as required	Only enough is used to reduce net gains to the AEA
Order of use	First	After current-year losses

Worked Example

Richard has the following position for 2026/27:

Component	Amount
Chargeable gains in 2026/27	£45,000
Current-year allowable losses	£5,000
Brought-forward allowable losses	£60,000
Annual Exempt Amount	£3,000

The calculation is:

Step	Calculation	Result
1. Start with chargeable gains		£45,000
2. Deduct current-year losses	£45,000 − £5,000	£40,000
3. Deduct sufficient brought-forward losses	£40,000 − £37,000	£3,000
4. Deduct AEA	£3,000 − £3,000	£0
5. Amount chargeable to CGT		£0
6. Losses remaining to carry forward	£60,000 − £37,000	£23,000

Richard therefore has no taxable capital gain for 2026/27 and retains £23,000 of allowable losses to carry forward.

The important point is that Richard does not use all £40,000 needed to reduce the remaining gains to nil. Only £37,000 of his brought-forward losses is used, leaving £3,000 of gains to be covered by the AEA.

The 4-Year Reporting Window

A capital loss does not have to be reported immediately. However, it must normally be reported to HMRC within 4 years after the end of the tax year in which the disposal giving rise to the loss occurred.

For example:

Tax Year of Loss	Normal Deadline
2025/26	5 April 2030
2024/25	5 April 2029
2023/24	5 April 2028
2022/23	5 April 2027

Once a loss has been properly reported, any unused amount can generally continue to be carried forward without a further four-year limit on when it must be used.

If you complete a Self Assessment tax return, the loss can normally be reported through the return. If you are not registered for Self Assessment, HMRC allows you to report a capital loss by writing to them.

It is therefore important not to confuse the 4-year deadline for reporting the loss with the period for using the loss. The former is time-limited; the latter is generally not.

Record Keeping

Keep sufficient records to support the calculation of both your capital gains and capital losses. Relevant records may include:

• contracts or statements showing the original acquisition and purchase price;

• contracts, completion statements or broker statements showing the disposal and proceeds;

• invoices and other evidence of allowable acquisition and disposal costs;

• evidence of qualifying enhancement expenditure;

• relevant valuations; and

• a running record of losses reported, losses used and losses remaining to carry forward.

For an individual who is not carrying on a trade, profession or business, HMRC generally requires CGT records to be retained for at least one year after the relevant Self Assessment deadline.

Records may have to be kept for longer, for example where a return is filed late or HMRC opens an enquiry.

Businesses generally have longer record-retention requirements.

As a practical matter, where significant capital losses are being carried forward for many years, retaining the underlying calculations and supporting evidence for longer can be sensible so that the amount and origin of the losses can be substantiated when they are eventually used.

Special Situations

Losses in the Tax Year of Death

Special rules apply to allowable capital losses arising in the tax year in which an individual dies.

Losses arising before death must first be set against gains arising in the period before death in that tax year. This applies even if doing so reduces the gains below the AEA.

If losses remain after that set-off, the excess can generally be carried back against gains arising in the three tax years preceding the tax year of death.

The losses are applied against the latest year first and, when carried back, are used only to reduce the gains for the earlier year to that year's AEA.

Any losses remaining after the available carry-back relief are generally lost; they do not pass to the deceased person's personal representatives or beneficiaries.

Negligible Value Assets

If an asset you still own has become worth nil or of negligible value, it may be possible to make a negligible value claim.

The effect is broadly to treat the asset as having been disposed of and immediately reacquired at the relevant value, potentially crystallising an allowable capital loss without an actual sale.

This can be particularly relevant to shares in companies that have failed or become effectively worthless.

Specific conditions and time limits apply, so negligible value claims should be considered separately from the ordinary rules for reporting a capital loss.

Losses on EIS and SEIS Shares

Special loss relief may be available where qualifying shares acquired under the Enterprise Investment Scheme (EIS) or Seed Enterprise Investment Scheme (SEIS) are disposed of at a loss.

Subject to the relevant conditions, the allowable loss — adjusted to take account of Income Tax relief already obtained — may potentially be relieved against income instead of being treated solely as an ordinary capital loss.

This can sometimes produce greater tax relief, particularly where the taxpayer's applicable Income Tax rate exceeds the CGT rate that would otherwise apply.

The EIS/SEIS and Share Loss Relief conditions should therefore be checked before automatically treating such a loss as an ordinary capital loss.

Summary

The key distinction is between current-year and brought-forward losses.

Current-year allowable losses must be deducted from gains arising in the same year, even where this results in some or all of the AEA being unused.

Brought-forward losses are protected: they are normally used only to reduce net gains to the level of the AEA, with any remaining losses preserved for future years.

Provided the original loss is reported to HMRC within the required 4-year window, unused allowable losses can generally continue to be carried forward until they are needed.