Losses on disposals to family and connected people

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The rule: "clogged" losses

Section 18(3) of the Taxation of Chargeable Gains Act 1992 says that if you make a loss on a disposal to a connected person, the loss can only be deducted from a gain on some other disposal to that same person, made at a time when you are still connected. HMRC calls such a loss "clogged".

GOV.UK says the same in plain words: you can’t deduct a loss from giving, selling or disposing of an asset to a family member unless you’re offsetting a gain from the same person — and this also applies to other connected people such as business partners.

Loss on selling shares to your brother	minus (£4,000)
Gain on selling a painting at auction (unconnected buyer)	£9,000
The £4,000 loss can’t reduce the £9,000 gain. It can only be set against a later gain on a disposal to your brother.

HMRC’s return notes say you must keep a separate record of each clogged loss you carry forward.

Who counts as connected

GOV.UK’s list of connected people includes:

• your brothers, sisters, parents, grandparents, children and grandchildren — and their husbands, wives or civil partners;
• the same relatives of your husband, wife or civil partner — and their husbands, wives or civil partners;
• business partners;
• a company you control;
• trustees where you (or someone connected to you) are the settlor.

HMRC’s return notes describe the family list slightly more widely, including other ancestors and direct descendants. The full legal definition is in section 286 of the 1992 Act — if a disposal is to someone near the edge of these lists, check the definition or take advice.

Disposals to connected people are also normally treated as made at market value, whatever price is actually paid — so the loss itself is worked out using market value, not the price you agreed.

Spouses and civil partners

A transfer to your husband, wife or civil partner while you are living together is treated as giving neither a gain nor a loss (section 58). GOV.UK says you can’t claim losses on these transfers. Instead, your spouse or civil partner takes over your original cost, and any gain or loss arises when they later dispose of the asset.

If you have separated, the law changed for disposals from 6 April 2023. HMRC’s helpsheet HS281 and section 58(1C) say no gain/no loss treatment continues until the end of the third tax year after the tax year you stopped living together (or earlier, if a court grants a divorce or dissolution before then), and transfers under a formal divorce or separation agreement or court order are at no gain or loss without a time limit.

Claiming a clogged loss

A clogged loss is still a capital loss that needs claiming. Report it in the capital gains pages of your return (or by letter if you aren’t in Self Assessment) within 4 years of the end of the tax year — see how to claim a capital loss. HMRC’s return notes say clogged losses may need an adjustment entry on the SA108 so that they aren’t set against the wrong gains.

Our set-off illustrator leaves clogged losses out — don’t include them in its figures.

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. HMRC Capital Gains Manual CG14561: Connected persons — losses (gov.uk)
3. Taxation of Chargeable Gains Act 1992, section 18 (legislation.gov.uk)
4. Taxation of Chargeable Gains Act 1992, section 58 (spouses and civil partners) (legislation.gov.uk)
5. HMRC helpsheet HS281: Capital Gains Tax — civil partners and spouses (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

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