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If you bought an asset and sold it at a loss then it is possible that you made a capital loss (e.g. if you invested in a start-up that failed or bought an investment property that went down in value, then this may well apply to you).

Capital losses can only be relieved against capital gains and if there are no gains in the year of the loss, the loss can be carried forward. However, if gains are incurred during the year that the loss was made, the loss is first set against the other gains for the year, with any balance remaining unused being carried forward. Losses must be set against gains of the same year before being carried forward, regardless of whether the gains exceed the annual exempt amount for capital gains tax (£11,100 for 2015/16).

In order to preserve a loss for use against gains in future years, it is necessary to establish that loss. You must return the loss within your Tax Return within four years, or amend an already filed Return to claim the loss. Alternatively, a claim can be made by writing to the tax inspector.

Remember, any size of loss if realised in isolation can be used in this way, and could save you up to 28% tax on the amount of the loss in future years.

Therefore, always claim losses in the year in which they arise and keep a note of the amount of losses you have accumulated.

Example:
John sold some shares realising a significant loss of £20,000 in 2014/15, and had no other disposals in the year. He omitted to register the loss at the time.

He is now selling his investment property on which he will realise a significant capital gain. The sale takes place in 2015/16.

In order to utilise the loss, he submits a revised Tax Return for 2014/15 showing the capital loss, which is accepted by HMRC. The loss is carried forward to future years.

He can now use the loss against his capital gain in 2015/16 which as he is a higher rate taxpayer saves £5,600 in tax (£20,000 @28%).