Introduction to this document

Share loss relief claim

Usually, capital losses can only be offset against other capital gains, but in some circumstances losses you incur on certain types of share can be offset against general income.

Share losses

Losses incurred on certain qualifying company shares are eligible for special treatment. Provided the conditions are met, the loss can be relieved “sideways” to offset your general income. This is typically more valuable than using the loss against capital gains because the income tax rates are higher. It can also unlock relief in circumstances where you are unlikely to realise capital gains in the future.

The loss can arise by way of:

  • an actual disposal of the shares; or
  • a successful negligible value claim.

Qualifying companies

Any shareholding where you claimed enterprise investment scheme (EIS) or seed enterprise investment scheme (SEIS) income tax relief that has not been withdrawn automatically meets the criteria for share loss relief without needing to consider anything further.

If not, you need to check that the shares meet the general requirements for share loss relief. Broadly, the company must be a smaller (broadly, gross assets not exceeding £7 million before your share subscription) unquoted trading company that is not listed on any recognised stock exchange. For these purposes, shares listed on the AIM exchange are not treated as quoted shares.

There are a number of activities that do not qualify as “trading” for these purposes, including investment activities, e.g. rental income, as well as anything specifically excluded from the EIS - such as energy generation.

Restriction on relief

Since 2013/14, there has been a restriction that means the maximum amount of loss that can be offset against income is the higher of £50,000, or 25% of adjusted net income. The restriction does not affect shares that successfully qualified for EIS or SEIS income tax relief as such shares are already subject to restrictions under the scheme rules.

Time limit

You need to claim share loss relief within one year of 31 January following the year in which the loss was made. Therefore, an allowable loss made in 2019/20 has to be claimed on or before 31 January 2022. The usual method of claiming would be on the tax return via entries in the capital gains pages, and by adjusting the tax calculation page. If you don’t complete a tax return you can use our Share Loss Relief Claim instead.