Share loss relief claim

Usually, capital losses can only be used to reduce capital gains but in some circumstances they can be used to reduce tax on 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 income. This is typically more valuable than using the loss against capital gains because the income tax rates are generally higher.

A capital loss can arise by way of:

• the sale or transfer of the shares in an unlisted trading company; or
• where the shares have become of negligible value.

Qualifying companies

A shareholding which qualifies for enterprise investment scheme (EIS) or seed enterprise investment scheme (SEIS) income tax relief automatically meets the criteria for share loss relief.

For other shares you need to check that they meet the conditions. Broadly, the company must be a smaller (broadly, gross assets not exceeding £7 million before your share subscription) trading company that is not listed on any recognised stock exchange. Note that 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

There’s a cap on the income tax loss relief: 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 2022/23 has to be claimed on or before 31 January 2025. 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.