Guide

Capital Gains Tax Losses 2026/27

Written by James Whitfield · Updated October 2026 Checked against 2026/27 HMRC rates

A capital loss cuts your CGT bill pound for pound - but only if you have gains to set it against, and only if you tell HMRC about it in time. Losses come off your gains before the £3,000 allowance,1 and the trap most people fall into is a loss made in a quiet year, never reported, then lost forever. Here is how the ordering works and how to keep every loss alive.

Key takeaways
  • Current-year losses are set against current-year gains first, and it is compulsory - you can't hold them back to save the allowance.1
  • Unused losses carry forward indefinitely - there is no time limit on using them once claimed.1
  • Brought-forward losses are only used down to the £3,000 exempt level, so they never waste the allowance.
  • You must report a loss to HMRC within four years of the tax year end to carry it forward - even with no tax to pay.3
  • Losses only offset capital gains, never income (bar a narrow EIS/SEIS exception).

How capital losses reduce your CGT bill

A capital loss arises when you dispose of an asset for less than you paid (after deducting allowable costs). Losses from the same tax year are set against gains from the same year first. Any remaining losses carry forward indefinitely to set against future gains.

Losses are deducted before the annual exempt amount. The ordering matters. Losses go first, which can sometimes wipe out the benefit of the AEA if the net gain after losses is already below £3,000.

The ordering: losses, then annual exempt amount

HMRC's ordering rules:

  1. Calculate gross gains and losses for the tax year
  2. Deduct current-year losses from current-year gains
  3. If gains still exceed losses, deduct brought-forward losses - but only enough to reduce the net gain to the annual exempt amount level (£3,000 for 2026/27)
  4. Deduct the annual exempt amount from whatever net gain remains

Note the subtlety in step 3: brought-forward losses are only used to the extent needed to bring the gain down to the exempt amount level. You do not have to use more brought-forward losses than necessary - HMRC preserves the excess for future years.

Worked example

In 2026/27 Emma sells shares at a £20,000 gain. She also sold different shares at a £5,000 loss in the same year.

Worked example — £20,000 gain, £5,000 loss in the same year
Gross gain£20,000
Less current-year loss−£5,000
Net gain£15,000
Less annual exempt amount−£3,000
Taxable gain£12,000
CGT at 24% (higher-rate)£2,880

Without the loss, Emma would have had a £17,000 taxable gain and a £4,080 bill - so the £5,000 loss saved her £1,200 (£5,000 × 24%).

Now say Emma also had £20,000 of brought-forward losses from a bad year. Her net gain after the current-year loss is £15,000. She only needs to use £12,000 of the brought-forward losses to bring that down to £3,000 - where the annual exempt amount mops up the rest, leaving zero CGT. The other £8,000 of losses stays banked for a future year. HMRC's ordering rule stops her being forced to burn all £20,000.

Carrying losses forward

Capital losses carry forward indefinitely - there is no time limit. But you must claim them by telling HMRC. The usual route is your Self Assessment return for the year the loss arose. If you do not file Self Assessment, write to HMRC to claim the loss.

HMRC tracks your losses in your CGT record. When you use them in a future year, you report them on that year's Self Assessment return.

The annual exempt amount is use-it-or-lose-it

Unlike losses, the £3,000 AEA cannot be carried forward. If your net gains are below £3,000, the unused portion is simply lost. It does not roll into next year.

This is why the ordering matters. If you use brought-forward losses to drive a gain all the way to zero before the AEA is applied, you waste the AEA for that year. HMRC's rule limiting brought-forward loss usage at step 3 exists precisely to prevent this.

You must report losses even if no tax is due

A common mistake: if you make a capital loss with no gains to offset it, there is no CGT to pay - but you must still tell HMRC about the loss within four years of the end of the tax year if you want to carry it forward. The deadline for claiming a 2026/27 loss is 5 April 2031.

Miss this window and the loss is forfeited. You cannot go back and claim it later.

What losses cannot do

  • Losses cannot be set against income - only against capital gains
  • Losses on assets that were gifts to a connected person (e.g. a family member) can only be offset against gains on disposals to the same connected person
  • Losses on assets that are exempt from CGT (e.g. your main home) do not create allowable losses
  • Bed-and-breakfasting rules prevent artificial loss creation by buying back the same shares within 30 days

See how losses affect your CGT

Enter your losses in the calculator alongside your gain to see the impact on your CGT bill for 2026/27.

Open the CGT calculator

Frequently asked questions

Can capital losses be carried forward indefinitely?

Yes - there is no time limit on carrying capital losses forward, as long as you claim them within four years of the end of the tax year in which they arose. Once claimed, you can use them in any future tax year when you have gains to offset.

Do losses go before or after the annual exempt amount?

Losses go before the annual exempt amount. Current-year losses are deducted from gains first. Brought-forward losses are then used (but only to bring the net gain down to the £3,000 exempt level, so the exempt amount is not wasted). The annual exempt amount is applied last.

Must I report a loss to HMRC if no tax is due?

Yes, if you want to carry the loss forward to future years. You must notify HMRC within four years of the end of the tax year. Report it on your Self Assessment return, or write to HMRC if you do not file Self Assessment. Without claiming it, the loss cannot be used later.

Can I use capital losses against income tax?

Generally not. Capital losses can only be set against capital gains, not against employment income, dividends or other income. There is a limited exception for losses on qualifying unquoted trading company shares under EIS or SEIS, which can sometimes be set against income - but this is a specialist area requiring professional advice.

What happens if I sell shares and buy them back to create a loss?

If you sell shares and buy back identical shares in the same company within 30 days, the bed-and-breakfasting rule applies. HMRC matches the sale against the repurchase price rather than your original cost, preventing an artificial loss from being created. To genuinely crystallise a loss, you must wait more than 30 days (31 days or more) before repurchasing, or buy a different but similar investment.

This page is for general information only and is not financial, tax or legal advice. Loss relief rules can be complex - consult a qualified tax adviser or accountant for advice on your specific position.

Sources & references

The rates, allowances and rules in this guide are drawn from the official HMRC and GOV.UK sources below, checked for the 2026/27 tax year. Each link opens the relevant government page in a new tab.

  1. Capital Gains Tax: losses www.gov.uk/capital-gains-tax/losses
  2. Capital Gains Tax — GOV.UK www.gov.uk/capital-gains-tax
  3. Self Assessment tax returns www.gov.uk/self-assessment-tax-returns
Verified against published HMRC and GOV.UK guidance.

Written and reviewed by James Whitfield and the UKCapitalGainsTaxCalculator editorial team.

Every figure is checked against current HMRC and GOV.UK guidance and reviewed for the 2026/27 tax year. We explain how the tax works in plain English with worked examples, not just numbers. Editorial standards · Sources · About us