Cap gains and losses
Discussion
Let’s say you sold a house (non primary residence) for £525,000 and paid £25,000 in cap gains immediately as you do.
You want to try keep the £500,000 remaining in pace with house price inflation to purchase a house later.
If you put £50,000 of the proceeds in something high risk, and lost £25,000, or half it’s value, do you basically claim a loss against the gain and end up at zero, and get your £25,000 back from HMRC?
It seems a no brainer to do this with an S&S isa wrapper as you’d avoid any tax on a gain, but be exposed to the losses only once you exceeded the capital gain paid on the house.
This seems wrong but if it is I can’t see how?
Kicking myself a bit at this point for not using it if so.
You want to try keep the £500,000 remaining in pace with house price inflation to purchase a house later.
If you put £50,000 of the proceeds in something high risk, and lost £25,000, or half it’s value, do you basically claim a loss against the gain and end up at zero, and get your £25,000 back from HMRC?
It seems a no brainer to do this with an S&S isa wrapper as you’d avoid any tax on a gain, but be exposed to the losses only once you exceeded the capital gain paid on the house.
This seems wrong but if it is I can’t see how?
Kicking myself a bit at this point for not using it if so.
If you want to use losses its no use having them in an ISA. ISA is tax free on gains but similarly ISA losses fall outside the CGT regime.
Yes, in any year Capital Gains and Capital Losses can be netted off and you only pay CGT on your net gains over £12,300. If you are claiming any losses at all to get under the £12,300 ceiling you must submit a CGT return (in self assessment) showing proper calculations even if no tax is payable.
If you end up with net losses they can be be carried forward but only if you've claimed them. i.e. submitted a CGT return (in self assessment) showing proper calculations.
Losses carried forward must be used up before you get another £12,300 annual allowance.
(For the avoidance of doubt, no, you can never carry forward gains to set against losses in future years.)
Yes, in any year Capital Gains and Capital Losses can be netted off and you only pay CGT on your net gains over £12,300. If you are claiming any losses at all to get under the £12,300 ceiling you must submit a CGT return (in self assessment) showing proper calculations even if no tax is payable.
If you end up with net losses they can be be carried forward but only if you've claimed them. i.e. submitted a CGT return (in self assessment) showing proper calculations.
Losses carried forward must be used up before you get another £12,300 annual allowance.
(For the avoidance of doubt, no, you can never carry forward gains to set against losses in future years.)
Edited by anonymous-user on Tuesday 9th March 23:44
OK thanks for the clarification on the ISA part.
So a relatively high risk approach with the house concern... or a rough hedge would be.
Sell property. Pay cap gains.
Invest say 20pc of capital in housing stocks/shares (or an ETF general tracker)
If the market goes up for housing, you gain and pay a little tax (no isa) but still get ~ 80pc of the gain.
If the market sinks, up to the cap gain on the property sale it's cost neutral, so you retain your initial capital (hmrc refund) and likely property prices recede and you can buy more for your money.
Seems a bit like a no-brainer.
Ah well.
So a relatively high risk approach with the house concern... or a rough hedge would be.
Sell property. Pay cap gains.
Invest say 20pc of capital in housing stocks/shares (or an ETF general tracker)
If the market goes up for housing, you gain and pay a little tax (no isa) but still get ~ 80pc of the gain.
If the market sinks, up to the cap gain on the property sale it's cost neutral, so you retain your initial capital (hmrc refund) and likely property prices recede and you can buy more for your money.
Seems a bit like a no-brainer.
Ah well.
rockin said:
Losses carried forward must be used up before you get another £12,300 annual allowance
I’m just trying to get my head around this.HMRC’s website seems to suggest you can bring forward any previous losses.
What is an example implication of this where it causes problems?
Is it suggesting you have to apply previous losses in any year you make a gain above your allowance, if you then want to then pass any remaining losses on again to future tax years?
Ie, you can’t save them up so to speak?
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