You can offset losses against gains to reduce your overall CGT liability and if total losses exceed gains you can carry forward the unused loss to future years but you must report both gains and losses to HMRC even if no tax is ultimately due.
The loss relief provision allows an investor to deliberately sell an underperforming token at a loss before the end of the tax year 5 April to offset gains realized earlier on other tokens, a strategy known as tax loss harvesting. If your total allowable losses exceed your total gains the excess loss can be carried forward to future tax years to reduce future gains but it cannot be carried back to reclaim tax paid in earlier years. However you must actively report all losses to HMRC even if you do not owe any tax for the year otherwise you will not have a formal record of the loss to use in future years.
If an investor’s capital losses in a given tax year exceed their gains the excess loss is carried forward automatically to future tax years but there is no time limit on how long these carried forward losses can be used. However you cannot offset carried forward losses against gains if you have any unused annual exempt amount in the current year because the exempt amount must be applied first. Lets say if you have £10,000 in carried forward losses and a £5,000 gain with a £6,000 exempt amount you would use the exempt amount to cover the whole gain and the carried forward losses would remain unused for another year.
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