What are the tax consequences of selling shares at a loss?

When shares are sold for more than the amount originally paid for them a capital gain arises and capital gains tax is charged accordingly.  When shares are sold for less than the amount originally paid for them, a capital loss arises. Unfortunately, capital losses arising on the sale of listed shares cannot be offset against income tax liabilities. Instead, they are offset against capital gains arising either in the same tax year, or in future years.

Capital gains and losses are calculated by deducting the orginal cost of the asset, plus any enhancement expenditure, from the proceeds received on the subsequent disposal. The original cost includes any fees incurred on the acquisition of the asset and the sale proceeds are likewise reduced by any fees incurred on the sale of the asset. Allowable fees include legal fees, Stamp Duty Reserve Tax (SDRT) when you bought the shares and stockbroker's fees.

If you sold the shares for less than they were worth, gave them away or acquired them through an Employee Share Scheme you may be required to use market value instead of proceeds when caclulating your capital gain or loss. There are other circumstances where you would need to use market value or use special rules and these can be found on the HM Revenue and Customs(HMRC) website.

Capital losses arising in the tax year must be offset against any gains arising in the same year and if there is a net gain, then the annual tax-free exemption (currently £3,000) is applied. If there is a net loss, the loss is carried forward to future years until relief can be given.

Utilising losses in this way is an important tax planning point, so we recommend you take advice from our team at TaxAssist Accountants Dunfermline before selling any shares at a loss.

Date published 5 Dec 2012 | Last updated 23 Aug 2024

This article is intended to inform rather than advise and is based on legislation and practice at the time. Taxpayer’s circumstances do vary and if you feel that the information provided is beneficial it is important that you contact us before implementation. If you take, or do not take action as a result of reading this article, before receiving our written endorsement, we will accept no responsibility for any financial loss incurred.

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