Capital losses are one of the most effective tools for reducing your CGT bill, but the order in which HMRC requires you to apply them is strict. In-year losses must always be used first and in full. The annual exempt amount (£3,000 for 2025/26) is applied next. Carried-forward losses from earlier years are applied last — and critically, only to the extent needed to reduce gains to zero above the AEA threshold. This preserves unused carried-forward losses for future years.
This calculator walks through each step, showing your net gain after each deduction, the losses actually used, and the losses remaining to carry forward.
HMRC Loss Offset Rules 2025/26
- Step 1: In-year losses must be applied in full against in-year gains.
- Step 2: Annual exempt amount (£3,000) applied to the remaining net gain.
- Step 3: Carried-forward losses applied — only to reduce gains to zero (not wastefully below AEA).
- Excess in-year losses (if losses > gains) are carried forward.
- Carried-forward losses must be reported within 4 years of the year they arose.
CGT Loss Offset Calculator
AEA 2025/26: £3,000. Rates: 18% basic / 24% higher for most assets and residential property. Carried-forward losses used only to extent needed to reduce gains above AEA level. Not tax advice.
The Correct Order for Applying Losses
The HMRC rules on the sequencing of loss relief are designed to prevent taxpayers from wasting their annual exempt amount. The key principle is that in-year losses are mandatory and must be applied regardless of whether doing so reduces gains below the AEA (potentially wasting the AEA for that year). Only carried-forward losses can be managed strategically.
If you have in-year losses that exceed your in-year gains, you have a net loss for the year. That excess loss is automatically carried forward — you do not choose this; it happens by operation of the rules. The excess carry-forward is then available in any future year, subject to the reporting time limit of four years from the year of the loss.
Carried-forward losses, by contrast, do not have to be applied in full. You apply just enough to reduce the net gain (after the AEA) to zero. Any carried-forward losses beyond that amount are preserved for the future. This is especially valuable if you expect larger gains in future years, as it may be more efficient to save carried-forward losses for a year when the taxable gain would otherwise be larger.
Residential Property Rates
Following the October 2024 Autumn Budget, the CGT rates for residential property were aligned with the rates for other capital assets. From 30 October 2024, residential property gains are taxed at 18% (basic rate) and 24% (higher rate), the same as shares and other assets. The previous 18%/28% rates for residential property no longer apply.
This means that the tax rate distinction between property and other assets has been eliminated for CGT purposes (though private residence relief, lettings relief, and other specific property reliefs still apply). The calculator uses the aligned rates for both asset types.
Strategic Loss Management
If you have large gains in a year and also have both in-year losses and carried-forward losses, the calculator shows you exactly how much of each type is used and what is preserved. Planning disposals to crystallise losses in a year when you also have gains can reduce your overall CGT bill across multiple years.
One common strategy is to sell loss-making investments before the tax year end to create in-year losses that offset gains realised earlier in the same year. However, the 30-day rule (bed and breakfast) means you cannot immediately repurchase the same investment to restore your position — you would need to wait 30 days or use a spouse's ISA or other mechanism. For shares, buying through a spouse who separately acquires the same shares avoids the 30-day rule, subject to the normal spouse transfer rules.
For crypto assets, the same 30-day rule applies. Loss harvesting by selling and immediately rebuying the same cryptocurrency will be matched under the bed and breakfast rules, eliminating the intended loss. You would need to wait 30 days or swap into a similar but different asset to realise the loss cleanly.
Using Losses Against BADR Gains
Capital losses can be applied against any type of capital gain, including BADR-qualifying gains taxed at 10%. However, from a tax efficiency perspective it is better to preserve losses to offset against higher-taxed gains (24% or 18%) rather than BADR gains (10%), since each pound of loss saves more tax at the higher rate. HMRC does not allow you to choose which gains specific losses are set against — losses are generally applied in the most beneficial way under HMRC guidance, but in practice the ordering can affect which gains are reduced first when gains at different rates are mixed.
If you have both BADR-qualifying and non-BADR gains in the same year alongside capital losses, professional advice on the ordering is recommended to ensure maximum efficiency.
Frequently Asked Questions
How do capital losses reduce CGT in the UK?
In-year losses must be applied against in-year gains in full. Carried-forward losses from earlier years are then applied only to the extent needed to reduce net gains above the annual exempt amount level. This preserves carried-forward losses for future years rather than wasting them on gains already covered by the AEA.
What is the annual exempt amount for 2025/26?
The annual exempt amount for 2025/26 is £3,000. Net gains up to this amount are free from CGT each tax year. The AEA is applied after in-year losses but before carried-forward losses in the HMRC sequencing.
Can I choose not to use in-year losses to preserve the AEA?
No. In-year losses must be applied in full against in-year gains. You cannot defer them. Only carried-forward losses can be managed strategically.
How do I carry forward capital losses?
Losses are carried forward automatically when they exceed gains. You must report them on your Self Assessment return within 4 years of the tax year they arose. Once reported, they can be used in any future year without a time limit.
What CGT rates apply in 2025/26?
18% for basic rate taxpayers and 24% for higher and additional rate taxpayers on most assets, including shares, crypto, and residential property (rates were aligned from 30 October 2024).
Can I offset share losses against property gains?
Yes. Capital losses from any asset can be offset against capital gains from any other asset. Losses are not ring-fenced by asset class. A loss on shares can reduce a gain on property.
What happens if my losses exceed my gains?
Excess in-year losses are carried forward. There is no time limit once reported. They can be used in any future year as long as they were reported within the 4-year window.
How should I apply carried-forward losses optimally?
Apply only enough carried-forward losses to reduce net gains to zero above the AEA threshold. Do not apply more than needed — unused losses carry forward and may be worth more in a future year with higher gains or higher rates.
Can I split gains between spouses to use both AEAs?
Assets transferred between spouses or civil partners are on a no gain no loss basis. Each has their own AEA. Gifting assets to a spouse before they sell can allow both AEAs to be used. The transfer must be genuine and the selling spouse must actually be the disposer.
Do ISA losses affect CGT?
No. Gains and losses inside ISAs are outside the CGT system entirely. ISA losses cannot be offset against other capital gains. Only disposals outside tax wrappers are relevant for CGT.
Can I use losses to reduce BADR gains?
Yes, but it is less efficient than offsetting higher-rate gains. A loss offsets 24p of tax per £1 against a higher-rate gain, but only 10p per £1 against a BADR gain. If possible, preserve losses to apply against higher-taxed gains.
What is the time limit to report capital losses to HMRC?
Losses must be reported within 4 years of the end of the tax year in which they arose. After this deadline, the losses are forfeited. Report via Self Assessment (SA108). Losses already reported have no expiry date for use.