A few CGT questions

[foxmccloud]

1, If a gain is taxed using a percentage, is a loss also taxed that way? So if a person makes a gain of £10,000 then the personal allowance is removed and they must pay 20% GCT tax (depending on their rate) of what remains. But if they make a loss, can they use the full amount as a loss? Or is it like a gain where you can only use 20% as your loss after a personal allowance. Sorry for the dumb question.

2, Do losses for any year need to be declared in that year if they are to be allowed to be carried forward. E.g. can a person make a loss in 2014 and keep it to themsleves and then declare it 2016 to offset a gain?

3, Do net losses need to be declared? If a person makes a gain in a year followed by a bigger loss, do they need to tell HMRC?

4, If a person's income is in the lower tax band, do they pay GCT for the higher tax band if their gain was higher than the higer rate of income. E.g. someone earns £25k a year but made a CG of £65k. Do they pay 10% or 20% CGT?

[foxmccloud]

Sorry one more question:

5, A person buys a stock using £10,000 and then the total value goes up to £100,000 and then they sell a part of that stock, e.g. £30,000 worth. They obviously have their personal allowance exemption of £11,300, but for tax purposes do they remove the original £10k from the gain or not? I.e. is the gain 30k - 11.3k - 10k = 8.7k? Or is it 30k - 11.3k = 18.7k?

I guess they can remove the original 10k once only? In subsequent years they will not be allowed to?

[AGoodman]

1. Yes, but you set the loss against a current or future gain, not the tax on the gain.
2. Not sure - probably not.
3. Sometimes - if you make gross gains in excess of 4x the annual exemption you have to declare them, even if you have no taxable net gain. You would therefore need to declare the losses as well to show that you do not have a net gain.
4. You add the gain to the income so part would be taxed at 10% and part (over the threshold) at 20%
5. If they sold 30% of the asset, they deduct 30% of the base cost. Gain of £27k then deduct 11.3 exemption, leaving taxable gain of £15.7k. Some parts of the tax code are logical.

[SteLacca]

Re 2. It's advisable to report the loss in the year in which it arises. There's no limit on how far a loss can be carried forward, and it could be several years before the loss is utilised. In such circumstances, documentation to support the loss may have been lost or otherwise disposed of.

By declaring in the year it arises you secure that future claim.

[bd6759]

Not just advisable. It is a statutory requirement if you want to use the loss.

See s16(2A) TCGA 1992. The loss must be notified to HMRC within 4 years.