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ACCA Applied Skills · Taxation (UK) · The basic principles of computing gains and losses

Marcus died on 1 December 2025. In 2025/26 up to death he made gains of £8,000 and had no losses. In the year of death he also had allowable losses of £20,000 from disposals before death. He had made gains of £30,000 in 2023/24, all in excess of the annual exempt amount of that year (assume £6,000 exempt used separately). Which treatment of the unrelieved loss is correct?

Losses are first set against 2025/26 gains, and any unrelieved balance is carried back against gains of the previous three years, taking the latest year first. Carry-back on death is a special rule and losses do not pass to personal representatives.

  1. ALosses are set against gains of 2025/26, and the unrelieved amount is carried back against gains of the previous three years, latest firstCorrect
  2. BLosses are set against gains of 2025/26, and the unrelieved amount is carried back against gains of the previous three years, earliest first
  3. CLosses are set against gains of 2025/26, and the unrelieved amount lapses on death
  4. DLosses are carried forward to his personal representatives

Explanation

On death, unrelieved losses in the year of death are carried back three years, against later years first (LIFO). Option stating earliest first is wrong on order. They do not lapse, and carry forward to personal representatives is not allowed. Here £8,000 is used in 2025/26 leaving £12,000 carried back to 2024/25 first and then earlier years.

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