Key facts
- Unused capital losses can be carried forward indefinitely — there is no time limit on use.
- Brought-forward losses only need to reduce gains to the Annual Exempt Amount level (not to nil).
- The 4-year claim window for reporting losses starts at the end of the tax year the loss arises.
- Current-year losses are set off before brought-forward losses.
- You must actively report losses to HMRC to preserve them for carry forward.
How Carrying Forward Works
If your allowable capital losses in a tax year exceed your chargeable gains, the excess losses are carried forward to the following tax year. These brought-forward losses remain available indefinitely until used against future gains.[1]
The order in which losses are applied is:
- Current-year losses are set against current-year gains first (mandatory, full offset)
- The Annual Exempt Amount (£3,000 for 2025/26) is applied against any remaining gains
- Brought-forward losses are used to reduce the remaining taxable gains — but only to the extent necessary to bring gains down to the AEA level
Current-Year vs Brought-Forward Losses
The most important distinction is how flexibly each type can be used:[2]
| Feature | Current-Year Losses | Brought-Forward Losses |
|---|---|---|
| Must be used against gains? | Yes — mandatory full offset | Only to reduce gains to AEA |
| Can waste the AEA? | Yes | No |
| Choice over amount used? | No | Yes (above AEA) |
| Applied before or after AEA? | Before | After |
Worked Example
Sarah has the following position for 2025/26:
| Component | Amount |
|---|---|
| Chargeable gains in 2025/26 | £40,000 |
| Current-year losses | £5,000 |
| Brought-forward losses | £50,000 |
The calculation works as follows:
| Step | Calculation | Result |
|---|---|---|
| 1. Start with gains | £40,000 | |
| 2. Deduct current-year losses (mandatory) | £40,000 − £5,000 | £35,000 |
| 3. Deduct brought-forward losses (to AEA) | £35,000 − £32,000 | £3,000 |
| 4. Apply AEA | £3,000 − £3,000 | £0 |
| 5. CGT payable | £0 | |
| 6. Losses remaining to carry forward | £50,000 − £32,000 | £18,000 |
The 4-Year Claim Window
You must notify HMRC of capital losses within 4 years of the end of the tax year in which the loss arose. If you fail to do this, the loss is permanently lost and can never be used:[3]
| Tax Year of Loss | Claim Deadline |
|---|---|
| 2025/26 | 5 April 2030 |
| 2024/25 | 5 April 2029 |
| 2023/24 | 5 April 2028 |
| 2022/23 | 5 April 2027 |
Tip: If you are not normally within Self Assessment but have a capital loss to report, you can write to HMRC to notify them. Consider registering for Self Assessment if you have recurring gains and losses — this provides a formal record and makes it easier to track your loss position.
Record Keeping
You should keep records to support your capital loss claims for at least 5 years after the 31 January filing deadline for the tax year in which the loss is reported (or used). Records should include:
- Evidence of the acquisition cost (purchase contracts, completion statements)
- Evidence of the disposal and proceeds (sale contracts, settlement statements)
- Details of any enhancement expenditure (invoices for improvements)
- A running record of your cumulative loss position
Special Situations
Losses on Death
Capital losses arising in the tax year of death can be carried back to the 3 tax years before death (later years first). This is the only situation where capital losses can be carried back.
Losses on Negligible Value Assets
If an asset becomes worthless (or nearly worthless), you can make a negligible value claim to crystallise the loss without having to sell the asset. This is particularly useful for shares in failed companies.
Losses on EIS/SEIS Shares
Losses on qualifying EIS and SEIS shares can be claimed as income tax losses (reducing your income tax bill) rather than capital losses. This may be more valuable if your marginal income tax rate exceeds your CGT rate.
Frequently Asked Questions
Is there a time limit for carrying forward capital losses?
No. Once validly reported, capital losses can be carried forward indefinitely. There is no expiry date. However, you must report the loss within 4 years of the end of the tax year in which it arose — if you miss this deadline, the loss is permanently lost.
Do I have to use all my brought-forward losses?
No. You only need to use enough brought-forward losses to reduce your net gains to the Annual Exempt Amount (£3,000 for 2025/26). You can keep the rest for future years. This is more flexible than current-year losses, which must be used in full.
How do I report losses to HMRC?
You report capital losses on the capital gains pages of your Self Assessment return (form SA108). If you are not in Self Assessment, you can write to HMRC to notify them of the loss. Keep records and evidence to support the loss claim.
Can I carry back capital losses?
No — capital losses can only be carried forward, not back. The only exception is on death: losses in the year of death can be carried back to the 3 previous tax years.
Further Reading
- Capital Losses: How to Use Them — the fundamentals of capital loss relief
- Negligible Value Claims — crystallising losses on worthless assets
- Annual Exempt Amount — the £3,000 tax-free allowance
- Reporting CGT on Self Assessment — how to include losses on your tax return
Looking for simple tax software?
#GoFile is HMRC-recognised and trusted by 50,000+ UK businesses. Set up in minutes, file with confidence.
Get Started For FreeNo credit card required · Cancel anytime
Sources
- Capital Gains Tax: what you pay it on — GOV.UK
- Capital Gains Manual: losses — HMRC
- HS227 Losses — HMRC