A capital loss is a term used to describe when you make a loss on selling an asset. An asset, in this context, could be a property, shares, a cryptocurrency, fine jewellery, a vintage car etc. And if you sell one of these assets for less than you originally bought it, this would be considered making a capital loss.
Check out this example of making a capital loss:
There are a number of things you can do with losses when it comes to tax. Here’s a selection:
You can offset a capital gain from the same year, and reduce your taxable profit – this means that you can use a loss like you might an expense and deduct it from your profits to be liable to pay less tax
Losses can be carried forward to the next year to offset a capital gain that you plan on making then
If a carried forward capital loss reduces your gain below the tax-free capital gains tax allowance (£3,000 in the 2024/25 tax year), you can take whatever losses are left and carry them to a future tax year
You’re not allowed to deduct a loss from giving or selling an asset to a family member, unless you’re also offsetting a gain from the same person
If you sell an asset for more than you bought it for, you make a profit. This profit is known as a capital gain. Profits that exceed the tax-free Capital Gains Tax Allowance mean that you’ll have to pay Capital Gains Tax on them.
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