Claim for a capital loss outside self-assessment

If you sell an asset for less than it cost, you will have made a capital loss. Usually, you are required to claim tax relief for a capital loss through your self-assessment tax return but if you don’t complete one you can instead send a written claim to HMRC.

Losses - generally

When you sell capital assets - like shares - for less than you paid for them, you end up with a capital loss. Losses can also arise where you inherit an asset which is then sold for less than the agreed probate value. Such losses can be used to reduce capital gains you make in the future, and so save you some tax. However, a loss has to be formally claimed or it will be wasted.

You can’t claim a loss if you knowingly sell an asset for less than it’s worth, for example selling shares to your children for a nominal amount. The disposal is not “a bargain made at arm’s length” and the true market value replaces the actual proceeds when working out the gain or loss. This will probably cancel out the loss, or at least reduce it significantly.

notifying HMRC of a loss

If you are within self-assessment you simply need to include the loss on your tax return by filling out the details on the capital gains pages. You should record the loss to carry forward on the return, and on each subsequent return until you can use it.

If you don’t complete tax returns you can use our letter to notify HMRC instead - the claim is just as effective. You simply need to provide some information about the asset that has been sold along with the proceeds, costs and relevant dates, plus a copy of your calculation.

Time limit

The notification must be made within four years of end of the tax year in which the loss occurred.