Capital losses: what counts as an allowable loss

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What a capital loss is

Capital Gains Tax is charged on the gain when you dispose of an asset that has gone up in value. GOV.UK lists the usual ways of disposing of something: selling it, giving it away or transferring it to someone else, swapping it, or receiving compensation for it (such as an insurance payout if it was lost or destroyed).

If the disposal goes the other way — you get back less than the asset cost you — the result is a loss. The law says a loss is calculated in exactly the same way as a gain would be. So you start with what you received (or the market value, in situations such as gifts) and take off your allowable costs.

Sale proceeds	£6,500
Less: what you paid for the shares	minus (£9,800)
Less: dealing costs when you bought and sold	minus (£200)
Capital loss	minus (£3,500)

Keep the paperwork that proves each figure — the contract notes, receipts and statements that show the dates and amounts. HMRC can ask to see it (see records and evidence).

When a loss is "allowable"

A loss can only reduce your tax if it is an allowable loss. HMRC’s manual puts the test simply: a loss is allowable if a corresponding gain would have been chargeable. That means:

• Assets that are free of Capital Gains Tax give no allowable loss. GOV.UK lists, for example, gains from ISAs or PEPs, UK government gilts and Premium Bonds, and betting, lottery or pools winnings. Your private car is also outside the tax.
• Your own home is usually covered by Private Residence Relief, so a loss on it is usually not allowable either. HMRC’s manual gives the example of a £10,000 loss on a property where 100% Private Residence Relief applies — that loss is not an allowable loss.
• Personal possessions (chattels) have special rules. HMRC’s manual notes that a chattel sold at a loss is treated as sold for at least £6,000, which limits the loss you can claim.
• Disposals to your husband, wife or civil partner are normally treated as "no gain, no loss", so there is nothing to claim. Disposals to other relatives and "connected" people give losses that can only be used in a restricted way — see connected people and clogged losses.
• Tax avoidance. HMRC’s return notes say losses resulting from tax avoidance schemes may not be allowable, and there are rules that stop losses arising in "disqualifying" circumstances counting at all.

You have to claim it

This is the step people miss. Under section 16(2A) of the Taxation of Chargeable Gains Act 1992, a loss is not an allowable loss unless you give HMRC notice of it, quantifying the amount. That notice is treated as a claim, so the general time limit for claims applies: 4 years after the end of the tax year in which you disposed of the asset.

Claim a 2026/27 loss by 5 April 2031

There is no special form. In practice HMRC accepts the loss being included in your Self Assessment return with your computation. If you’ve never made a gain and aren’t registered for Self Assessment, GOV.UK says you can write to HMRC instead. The full details are in how to claim a capital loss.

How an allowable loss is used

Once claimed, the loss is deducted from your gains in a set order:

1. against your gains of the same tax year, in full;
2. any unused amount is carried forward and set against later years’ gains — but only as far as needed to bring those gains down to the annual exempt amount (£3,000 for 2026/27).

Capital losses can’t usually be carried back to earlier years (there are narrow exceptions, such as losses in the tax year someone dies). See how capital losses are set against gains and try the set-off illustrator.

Special cases with their own guides

• Shares that have become worthless — negligible value claims.
• Shares you subscribed for in an unlisted trading company — you may be able to set the loss against income.
• Cryptoassets.
• UK property, including the 60-day reporting service.

Sources

Checked 4 October 2026 for the 2026/27 tax year. We read these primary sources for this guide:

1. GOV.UK: Capital Gains Tax — If you make a loss (gov.uk)
2. GOV.UK: Capital Gains Tax — What you pay it on (gov.uk)
3. GOV.UK: Capital Gains Tax — Record keeping (gov.uk)
4. HMRC Capital Gains Manual CG15800: Losses — allowable losses (gov.uk)
5. Taxation of Chargeable Gains Act 1992, section 16 (legislation.gov.uk)
6. HMRC: SA108 Capital Gains Tax summary notes (2025–26 edition) (gov.uk)

Contains public sector information licensed under the Open Government Licence v3.0. This guide adapts and summarises that information in our own words. taxloss.co.uk is an independent guide. It is not affiliated with, endorsed by or connected to HM Revenue & Customs (HMRC) or the UK Government. Spotted something out of date? Tell us.

More on capital gains losses

• 02How to claim a capital loss — and the 4-year time limitA capital loss only counts once you have told HMRC about it, with the amount. Here’s how to do that on your tax return or by letter, and the deadline you must meet.
• 03How capital losses are set against gains — and the annual exempt amountThis year’s losses are used up in full first, even if that wastes your tax-free allowance. Losses brought forward from earlier years are only used to bring your gains down to the annual exempt amount — the rest carries on.
• 04Losses on disposals to family and connected peopleSell or give something to a relative, business partner or a company you control and make a loss, and that loss is "clogged" — you can only use it against gains on other disposals to the same person. Transfers to a spouse or civil partner usually give no loss at all.
• 05Shares that have become worthless: negligible value claimsIf shares (or other assets) you still own have become worth next to nothing, a negligible value claim lets you be treated as having sold them, creating a capital loss. The claim can be backdated — within limits.
• 06Share loss relief: setting a loss on shares against incomeLosses on shares you subscribed for in a qualifying unlisted trading company — including EIS and SEIS shares — can sometimes be set against your income instead of only against gains. The claim has a shorter deadline.
• 07Cryptoasset lossesSelling, swapping or spending tokens for less than their cost gives a capital loss you can claim like any other. HMRC treats lost keys and theft differently — and worthless tokens need a negligible value claim on the whole pool.
• 08Losses when you sell property — and the 60-day UK property returnA loss on selling a second home, buy-to-let or land is a capital loss you claim in the usual way. UK residents normally only use the 60-day "Capital Gains Tax on UK property" service when tax is due — non-residents must report every disposal, even a loss.