You keep two sets of losses and they will never agree

Figures relate to tax year 2025-26 (UK) · 2025 (US)

Capital losses are supposed to be the simple part. You sold something for less than you paid, the difference comes off your gains, and the bill falls accordingly. Both countries accept that principle without argument.

They agree on almost nothing else. The amount differs, because the two systems measure cost in different currencies. What you can set it against differs. How long you can keep it differs, and one country makes you claim it inside a deadline.

So you end up with two pools of capital losses that drift further apart with every transaction. Treating them as one number is the mistake that costs the most.

Key takeaways

• A UK loss must be claimed within four years of the tax year end.
• Claimed UK losses then carry forward indefinitely.
• America carries losses forward automatically with no claim needed.
• America allows $3,000 of net loss against ordinary income each year.
• Britain allows nothing against income for ordinary share losses.
• Currency movement can turn a sterling loss into a dollar gain.
• The two loss pools are different numbers and must be tracked separately.

What is a capital loss?

It is the shortfall when you dispose of an asset for less than it cost you. According to GOV.UK guidance, you compute capital losses exactly as you compute a gain, using the same rules on allowable costs and the same disposal date.

That symmetry matters, because it means every quirk in the gain calculation repeats itself in the loss. The share matching rules, the treatment of acquisition costs and the pooling of identical holdings all apply in exactly the same way.

Both countries work on realised losses rather than paper ones. A holding that has halved in value gives you nothing until you actually sell it, however bad the position looks on the statement.

Why must a UK loss be claimed?

Because British losses are not automatic. You must notify HMRC of capital losses within four years of the end of the tax year in which they arose. Miss that window and the loss goes for good.

This surprises people who assume the return does it for them. If you had no gains that year and did not need to file a capital gains page, nothing told HMRC the loss existed, and nothing will carry it forward on your behalf.

A letter is enough where there is no return to put it on. It needs the amount, the asset, the date and enough detail to identify the disposal, and it has to arrive before the four years run out.

How does America handle the same loss?

Automatically, because losses go on the return for the year they arise as a matter of course. No separate claim exists and no deadline threatens, because capital losses sit alongside the gains on the same schedule.

What America adds is an annual allowance against other income. Where losses exceed gains, you can deduct up to $3,000 of the excess against ordinary income each year, with the remainder carrying forward.

That deduction is modest but it is real, and Britain offers nothing comparable for ordinary share losses. A year of heavy losses and no gains produces a small American benefit and no British one at all.

A worked example

The figures below are illustrative. They use round numbers so you can follow each step and substitute your own.

Anna is American and lives in London. She bought shares for £50,000 in 2020 when the rate was 1.25, so her dollar cost was $62,500. She sells them in 2026 for £44,000 when the rate is 1.45, receiving $63,800.

In Britain she has a capital loss of £6,000. She claims it within the deadline and carries it forward against future gains.

In America she has a gain of $1,300, because the pound strengthened by more than the shares fell. The same transaction produces a loss in one country and a taxable gain in the other.

Nothing has gone wrong. Each system measured the result in its own currency, and over six years the currency moved further than the share price did. This is the most common reason the two pools diverge.

Why do the two numbers differ?

Mostly currency, and then everything else. America measures capital losses in dollars. It converts your cost at the rate when you bought and the proceeds at the rate when you sold, so exchange movement feeds straight into the result.

Britain measures in sterling throughout, so for a sterling asset there is no currency element at all. The same disposal therefore produces two genuinely different figures rather than one figure expressed twice.

Other differences stack on top. The matching rules for shares bought and sold close together are not the same, and some assets exempt in one country are chargeable in the other.

The two systems compared

The table sets out where they part company. Almost every row is a reason the pools drift.

Can a loss be set against income?

In America yes. Net capital losses can come off ordinary income at up to $3,000 a year. In Britain almost never for listed shares, though a narrow relief exists for losses on unquoted trading company shares you subscribed for yourself.

That narrow British relief is worth knowing about because it is genuinely valuable when it applies. It lets a loss on qualifying shares come off income rather than waiting for a future gain to absorb it.

Our guide to EIS shares for US investors covers the related reliefs. The conditions are strict, and you must have subscribed for the shares rather than bought them from someone else.

Do the anti-avoidance rules match?

They cover the same ground and work differently. Both countries stop you selling at a loss and immediately buying back, and both use a thirty day period, but they apply it from opposite ends of the transaction.

Britain matches a disposal with any acquisition in the following thirty days. America disallows the loss where you buy substantially identical securities within thirty days either side of the sale, which is a sixty one day window in total.

Our guide to the wash sale rule covers the detail. One rule can catch a repurchase while the other lets it through, which pushes the two pools of capital losses further apart.

What happens to losses when you leave Britain?

Claimed capital losses stay on your record and remain available against future British gains, should you have any. They do not expire because you moved, and they do not transfer to anyone else.

The practical question is whether you will ever have a British gain to use them against. Someone who leaves permanently and sells nothing here again may be carrying a pool they can never spend.

That is a reason to use losses while you can rather than bank them. Realising a gain to absorb a loss before departure can be better than leaving both unused.

Can losses be carried back?

Essentially no in both countries, with one significant British exception. Capital losses arising in the year of death can go back against gains of the three preceding years. That matters a great deal to executors.

Outside that, a loss only ever looks forward. There is no mechanism to reopen a profitable earlier year and apply a later loss to it, however unfair the sequencing feels.

Our guide to a US executor of a UK estate covers the position on death. It is one of the few places where capital losses reach backwards.

Does a loss affect your foreign tax credit?

It can, and in a way that catches people out. Wiping out a British gain with British capital losses means you pay no British tax. Nothing then exists to credit against American tax on the same disposal.

Where America still sees a gain on that transaction, the result is American tax with no relief at all. The British loss has done its job here and left you exposed there.

This mirrors the usual problem, and it is why you model the two pools together. Spending a loss in one country has a cost in the other.

What about losses inside an ISA or pension?

They vanish for British purposes, because a sheltered wrapper has no capital gains tax and therefore no capital losses either. A disaster inside an ISA gives you nothing to carry forward against gains held outside it.

America ignores the ISA wrapper entirely, so the position there depends on what the holding actually is. An ordinary share held in an ISA can produce a real American loss even though Britain sees nothing.

Our guide to the ISA and PFIC problem covers why pooled funds behave differently again.

Do negligible value claims help?

They can rescue a loss on something you cannot sell. Where a holding has become worthless, Britain lets you claim that it has negligible value and treat it as disposed of, which crystallises the loss without a transaction.

You can backdate the claim up to two years in some circumstances, which occasionally reaches a year you would otherwise have lost. The company usually has to be formally insolvent rather than merely struggling.

America has a comparable concept for worthless securities, with its own evidence requirements and its own timing. The two claims are made separately.

What happens with jointly held assets?

Each owner has their own share of the loss, in proportion to their beneficial interest rather than whose name is on the account. Capital losses cannot be transferred between spouses after the event.

What you can do is move the asset before selling. A transfer between spouses happens at no gain and no loss in Britain, so the eventual disposal falls on whichever of you can use the result.

That planning collapses where one spouse is American and the other is not. The American side then has its own view of who owns what.

Does property work the same way?

Broadly yes for the loss itself, though the reporting differs sharply. A loss on a British residential property still has to be claimed in the same way, and it joins the same pool as a share loss.

The sixty day reporting deadline for residential property disposals applies to gains rather than losses, but a disposal at a loss is still worth reporting promptly. It establishes the figure while the paperwork is to hand.

Our guide to second homes covers the wider property position.

How should you track them?

In one schedule with two columns, updated every time you sell something. Record the asset, the dates, the sterling figures and the dollar figures side by side, and carry the two running totals separately.

A spreadsheet is enough. What matters is that it runs continuously. Rebuilding it each spring from broker statements that show one currency defeats the point.

Keep it going even in years with no disposals, because capital losses have to survive gaps, job changes and house moves.

What records do you need?

Contract notes for every purchase and sale, the exchange rate applied on each date, and a copy of the claim letter or return page that notified HMRC of each British loss. Those three let you prove both pools years later.

The claim evidence is the one people lack. HMRC can ask you to show that you notified the loss in time. A carried forward figure with nothing behind it is hard to defend.

Brokers rarely keep records longer than you will need them. Download the history while the account is still open.

How to handle them

1. Record every disposal in both currencies as it happens.
2. Work out the British loss in sterling using British rules.
3. Work out the American result in dollars using American rules.
4. Claim each British loss within four years of the tax year end.
5. Keep evidence of how and when you notified HMRC.
6. Report the American position on the return for that year.
7. Carry the two running totals forward separately.
8. Model both pools together before realising a large gain.

Mistakes and penalties we see with capital losses

The first is assuming HMRC claimed the British loss for you. In a year with no gains and no capital gains page, nothing told HMRC anything. Four years later the loss has gone.

The second is carrying one number for both countries. They were never the same figure, and the gap widens with every disposal and every currency movement.

The third is spending a British loss without checking the American consequence. No British tax means no credit, which can leave an American charge standing alone.

The fourth is losing the evidence of the original claim. The figure survives in your spreadsheet and the proof does not, which is a problem only when HMRC asks.

How US UK Tax Accountants helps

We build and maintain the two pools side by side, claim British losses inside the deadline, and model what spending a loss in one country does to the position in the other. Then we file both returns from the same underlying schedule.

Where losses from earlier years were never claimed, we check which are still inside the window. Our US federal return service covers the filing.

If you hold investments and file on both sides, get in touch. Losses are worth real money, and the ones people lose are lost to a deadline rather than to the market.

Last reviewed 9 October 2026. This article is general information and not personal tax advice. Every portfolio turns on its own facts, so take advice on yours before claiming.