Losses on share sales

[billyboy26]

I am finalising my tax returns for April last. My share profit exceeded the £9,200 exemption by £6000 plus. However, I have two seperate share losses totalling over £8000 to offset against the £6,000 plus, that CGT is payable on. Do I do (a) or (b)?
(a) submit ALL the £8,000 losses so pay no tax this year and carry forward the unused part of the 8k losses to a future year.
(b) submit only one of the losses and pay tax on a reduced profit of £560. Then use the other loss in future IF I make a profit in excess of exemption.
Sorry to be so long winded and thank you.

[Simon Sweetman]

The rule for CGT is that you work out your gains and losses and then accumulate them. You do not claim the losses and you cannot disclaim them, so your CGT position for the year is simply that your net gains are below the exemption limit, but that the losses have all been used.

[billyboy26]

Thank you Simon for your quick answer. It seems I have no taxes to pay if ALL the lossses are used. However, it seems to me as a layman that you suggest ALL losses have to be used in the tax year they occur in. This is even if all of the higher accumulated losses of the year are not needed to wipe out a lower accumulated yearly profit. This seems a waste of losses for the future. I had hoped to use all the loss from one sale and only a part of the other share loss carrying forward the unused part of the loss to benefit a future profitable year if in excess of the personal exemption.

[Simon Sweetman]

You can carry a loss forward against future gains where it exceeds your gains for the year, but in this case you have no loss available because it is all used against the gains. The answer is that where it is possible you need to manage the time of your disposals.

[boody]

Like Billyboy I had a similar situation last year. I used the losses on an individual sale in order to reduce my CGT to only £56 overall gain. I then paid the small ammount of tax due! I retained the other undeclared £1000+ loss on another share for this year. I am currently building the 1k into my calculations to decrease my profit. I am now wondering If I and presumably other have acted incorrectly by carrying forward a loss and then using it. Incidentally what would happen if someone had years of losses triggered but not needed, ( for 5 years) as the yearly profit ammount for tax due wasn't ever reached

[Simon Sweetman]

boody - indeed this was incorrect. But unused CGT losses can be carried forward indefinitely to set against subsequent gains - for twenty or thirty years if need be !

[boody]

Simon I think you misunderstood Billyboy he said he didnt need all his losses to exempt him from tax. He wanted to know if he could use PART of an individual loss to reduce the profit to £9200. He didnt as you suggest need to use "all" his losses. He had a £6000 profit in excess of the tax free allownce BUT he had £8000 of losses. I read his query and I thought carry forward the £2000 you don't need this year but I am only a layman He wanted as you now indicate possible to carry (some of an individual sale) loss forward. It seems to me: Can you carry part of a loss that's not needed forward!

[Simon Sweetman]

I thought I had made this clear. If there are gains of £15000 and losses of £8000 then all those losses are used - there is no question of picking and choosing. The net gain of £7000 is covered by the annual exempt limit and there is no tax to pay.

[bettyone]

Hi Simon Betty here. lets all get in on the post. gains/profit =£15,000 and losses of £8000 same year. Therefore, deduct £9,200 cgt allowance from the sales £15,000 profit = about £6,000 to pay CGT on. BUT Billyboy has about £8,000 worth of losses made in the same tax year. So £2000 more than is needed to wipe out a tax bill. You state "all those losses are used". I ask. Why are "all those losses used"{ie £8,000] when only £6,000 approximately is needed (not 8k)to reduce £15,000 profit to the £9,200 tax free allowance. I think all questioners realise no tax to pay but wonder why "all those losses" ie £8000 "are used." Can the loss difference of £2,000 that is not needed be caried forward for "twenty or thirty years if need be!" I still think the original question a) or b) method has not been answered. Which is the correct way to submit the tax form using billyboys a) or b) ???

[konya]

My computation is :-

£

Gains 15200
Losses (8000)
______
7200
______


AE 9200

Taxable Gains Nil

Losses C/F Nil

It is mandatory to set off current year losses against current year gains before annual exemption. You can only restrict losses set-off, if they are brought forward from earlier years. Therefore, in Billyboys case, some losses are wasted. Not fair, but that is the law.

So, bettyone, to answer your question, both a) and b) are wrong.