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Where Taxpayers and Advisers Meet

Investment loss - help

FRITHSTAR
Posts:2
Joined:Fri Nov 03, 2017 9:36 pm
Investment loss - help

Postby FRITHSTAR » Fri Nov 03, 2017 9:45 pm

Is there a tax relief I am entitled to for investment losses?

I am an employee earning £24k pa. If I have invested £10k into a stock and it is only worth £7k and I sell at a loss of £3k, can I somehow deduct that from the amount of tax I have paid in this tax year?

How would I do this? Which HMRC forms do I need?

And is it actually worth the fuss?

I'd appreciate any input, thanks!

Lambs
Posts:1611
Joined:Wed Aug 06, 2008 3:15 pm

Re: Investment loss - help

Postby Lambs » Sat Nov 04, 2017 11:59 am

F,

Investments are generally seen as capital assets. If you made a loss on an investment/capital asset such as shares, then it would be a capital loss.

You cannot normally set capital losses against income/earnings. So no tax relief against salary, self-employed profits, or similar.

Capital losses may usually be set only against current or future capital gains. So, you would have to make a gain on (say) some other share investment, that exceeded your Annual Exemption, before your capital loss would be used to set off any net taxable capital gain.

So, capital losses such as you describe do have some 'value', but it is relatively limited. There ARE some special categories of share investment that can either save Income Tax, or where the losses may be set against income, and not just other capital gains. They tend to be relatively high-risk, and not commonly traded - you would normally need to be an experienced investor, or have the benefit of a competent financial advisor, before having the confidence to consider investing in them.

But if someone has approached you asking you to invest in their small company venture, then this may actually be the very kind of investment that may qualify for the more generous tax reliefs. Nevertheless, I should recommend speaking to an accountant/tax adviser or similar before assuming the numerous criteria are satisfied - to illustrate, the company has to BE certain things, and to DO certain things, before you might get access to anything other than standard capital loss relief.

Hope this is useful,

Lambs

FRITHSTAR
Posts:2
Joined:Fri Nov 03, 2017 9:36 pm

Re: Investment loss - help

Postby FRITHSTAR » Sat Nov 04, 2017 8:21 pm

Thank you very much for your reply it was very helpful.

Lambs
Posts:1611
Joined:Wed Aug 06, 2008 3:15 pm

Re: Investment loss - help

Postby Lambs » Sat Nov 04, 2017 9:19 pm

F, you are most welcome. I do hope that if you do end up investing, you do not end up with a substantial capital loss. But if you do, you can claim it, and hopefully one day you will be able to get relief for it.

2 important further points to bear in mind:

Once established, a capital loss has no "use by" date: it lasts forever. If you didn't make a capital gain for another 30 years, it would still be available. (Assuming they don't change the law in the interim). However, if you had to wait that long, I'd make darn sure I had paper evidence of HMRC's acknowledgement of the loss, etc.

A capital loss must be claimed. Taxpayers used to be able to claim relief for a loss they made several years prior, at the (potentially much later) time they wanted the relief - e.g., when they made that gain 30 years later. ("But I made a loss in 1976 when I sold my shares in the GPO: here's my 40-year-old share trading slip as proof!") Nowadays, however, you have to claim the loss around the time it was made and, once the amount has been notified to HMRC, THEN it lasts forever.

Hope that makes sense.

With regards,

Lambs


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