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Income Shares Investment Trusts

The part of a split capital investment trust that usually gives you the right to all of the income produced by the trust and the return of your original investment at wind up.

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How do I offset a loss against capital gains tax?

Tax | Capital Gains Tax Helpful? 9

Asked by brianc, submitted 27 October 2010.

Open Quote I know that losses on shares can be offset against future capital gains, but does this include losses made in Unit Trusts or OEIC's and can these losses be offset against capital gains made on a second property?

When you inform HMRC do you have to name the shares/unit trust, the buying/selling cost, etc, etc.
End Quote

Answered by Justin on 28 October 2010

Yes. Provided an asset is subject to capital gains tax then you can offset losses against other gains when calculating your tax bill.

The losses can be from an earlier tax year than the gain and there are two steps you need to follow: claim the loss (i.e. make HMRC aware of it) then use it against gains.

To claim a loss you must inform HMRC within 4 years of the end of the tax year in which the loss was realised (it used to be 5 years after the 31 January following the end of the tax year). If you complete a self-assessment tax return you simply need to enter the loss on the return for the relevant tax year, otherwise you'll need to write to your tax office. It's worthwhile detailing the loss in the 'any other information' box on the tax return or in the letter to your tax office - show the price and date at purchase and sale along with the name and loss being claimed.

A loss must first be used against any gains made in the same tax year, but you only have to reduce gains down to the annual capital gains tax exemption (£10,100 for 2010/11) and any remaining loss can then be carried forward to use in future tax years.

So, for example, if you realise losses of £25,000 on unit trusts during the 2010/11 tax year and make a gain of £50,000 on a second home during the same year you can offset the losses to reduce your gain to £25,000 for this tax year. If the property is instead sold in a later tax year you could claim the losses when they occur and then carry them forward (assuming no other gains to offset against) to the tax year in which the property is sold.

Suppose the unit trust loss was £50,000 and the property gain only £25,000, then you would use the loss to reduce the gain to the £10,100 annual exemption and carry forward the loss balance of £35,100 to use in future tax years.

Most investments, including unit trusts and oeics are subject to capital gains tax, so losses can be used to offset gains. The main exceptions are your main residence, jewellery/art/antiques that are individually worth £6,000 or less, gilts and investments held within ISAs, pensions and venture capital trusts.


Please note this answer does not constitute a recommendation or financial advice and should not be relied upon when making specific investment or other financial decisions. You should always undertake your own research into whether a product or service is appropriate for your needs and, if necessary, use a qualified professional adviser.

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