In 1989 I sold my parents’ house. Due to a fluctuating market, I was informed in writing by HMRC of a loss on capital gains of £32,000.
I thought nothing of this letter then and with the passage of time and moving several times I have lost it.
Is there a way to compensate for this with capital gains that I have now achieved?
Capital Gains Tax: Can I Use a Loss of £32k on the Sale of a House in 1989 to Lower My Bill Now?
Heather Rogers replies: You will be pleased to know that as a private individual you can indeed offset capital losses against future capital gains indefinitely.
The Capital Gains Tax came into effect in 1962, and many changes have been made to the legislation over the years.
Let’s see how it works first and then how you can use your 1980s loss to lower a current CGT account.
For individuals, the tax is levied on a person in the tax year of assessment, both UK residents and those disposing of assets in the UK but not resident for tax purposes.
The tax is paid on the profit made on the gain on the sale of assets such as real estate, stocks, antiques and works of art, but not on wasteful assets such as cars.
You usually do not have to pay capital gains tax on the sale of your main residence.
If you are a higher or additional rate taxpayer (40 percent or 45 percent, respectively), the CGT rate is 28 percent on home profits and 20 percent on other taxable assets.
For basic rate taxpayers (20 percent), if your taxable gains plus your total taxable income fall within the basic income tax bracket of £12,571 to £50,270, the CGT rate is 18 percent on residential properties and 10 percent on other gains.
If the amount is higher, the CGT rate is 28 percent on residential properties and 20 percent on other gains.
The government has learn more about CGT rates here.
The profit is calculated on the proceeds minus the purchase price or the value at which the good was acquired, for example by inheritance of a good.
You can also deduct expenses incurred in buying and selling the asset, or money spent improving the asset and increasing its value.
The tax rates depend on your other income and there are special rates for the sale of homes, such as a second home or a home that you rent out.
Each tax year you will receive a compensation (€12,300 in 2022/23) on which you do not have to pay capital gains tax.
The profits you make that exceed this allowance are taxed at the rate that applies to your total income, including the capital gain itself, and the type of assets sold.
If applicable, you may be able to claim exemption from the sale of assets on the sale of your own company and certain stocks.
The tax is due no later than January 31 following the end of the tax year, with the exception of the tax due on capital gains on residential properties, such as the sale of second homes or rented properties.
This is payable within 60 days of sale and must be accompanied by a return of property gains to HMRC.
Capital losses are simply where the proceeds from the disposal of an asset is less than the amount for which it was bought or acquired.
The same admissible costs such as buying and selling costs and improvement costs can be included in the calculation, which can further increase the loss.
You cannot claim a loss on the sale of an asset that is exempt from capital gains tax.
Capital losses incurred in the same tax year as any gains may be offset against the gains or carried forward against the gains of a future tax year.
There is currently no time limit on how long they can be transferred. You can make the claim on your self-assessment tax return and also on your Property Gains Disposal Return to HMRC.
Capital losses cannot be reversed to prior years and they cannot be offset against income, except in some very limited circumstances.
Claim your damage by including it in your tax return.
If you are not filing a tax return, you can write to HMRC instead. Be sure to include your calculation and details of the removal.
You don’t have to report losses right away – you can tell HMRC up to four years after the end of the tax year that you disposed of the asset and made a loss.
However, the rules are different for losses incurred before April 5, 1996.
You can still tell HMRC this now.
You must also deduct more recent losses from any gains before deducting losses prior to 1996.
In your case, HMRC must be aware of your loss, so when you file your claim, include it on your tax return.
It is worth attaching a note regarding the letter you received from HMRC regarding the agreed loss, as well as an explanation of the original deletion.
However, as the loss is covered by the pre-1996 rules, you can report it to HMRC again from the beginning if necessary, even if the original paperwork filed at the time has gone astray.
Tax expert Heather Rogers answers our readers’ questions
Heather Rogers, founder and owner of Aston Accountancy, is our tax columnist. She is ready to answer your questions on any tax topic – tax codes, estate taxes, income tax, capital gains tax and much more.
If you would like to ask Heather a question about tax, please email email@example.com. Please put TAX QUESTION in the subject line.
Heather will do her best to answer your message in an upcoming monthly column, but she won’t be able to answer everyone or correspond privately with readers. Nothing in her answers constitutes regulated financial advice. Published questions are sometimes edited for brevity or other reasons.
Please include a daytime contact number with your message – this will be treated confidentially and not used for marketing purposes.
If Heather is unable to answer your question, you can also contact MoneyHelper, a government-sponsored organization that provides free financial assistance to the public. It can be found here and the number is 0800 011 3797.
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