A capital loss is a loss you make when you sell an asset (property, shares, cryptocurrency, etc.) for less than you paid for it.
Example of a capital loss:
- let’s say that you bought a buy-to-let property for £250,000
- five years later you sold it for £200,000
- you made a capital loss of £50,000.
You can also claim losses on assets that you still own if they become “worthless”.
What you can do with it:
- you can offset a capital gain from the same year, and reduce your taxable profit
- you can carry this loss forward to the next year and offset a capital gain that you plan making then. If next year this capital loss somehow reduces your gain below the tax-free capital gains allowance, you can take whatever losses are left and carry them to a future tax year
- but you cannot 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 sold an asset for more than you bought it for, you made a profit or a “capital gain” instead, and you might need to pay Capital Gains Tax on it.