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

Priya, a UK resident individual, sold a painting in 2025/26 and realised a capital loss of £9,000. She made no other disposals in the year. Which statement about the treatment of this loss is correct?

The £9,000 loss is carried forward and set against future chargeable gains with no time limit. Capital losses cannot be offset against income, and carry-back is available only in the year of death, so the other options are incorrect.

  1. AThe loss can be set against her total income for 2025/26 to reduce income tax
  2. BThe loss is carried forward to be set against future chargeable gains, with no time limit on its useCorrect
  3. CThe loss can only be carried back three years against earlier gains
  4. DThe loss is lost unless it is claimed within four years of the end of the tax year

Explanation

A capital loss cannot be set against income (in the general case tested here). With no gains in the year, the loss is carried forward indefinitely against future gains. Carry-back applies only on death, so the carry-back option is wrong. Allowable losses must be claimed within four years, but the loss is carried forward automatically when set against gains, so the option stating it is lost is wrong.

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