Tax saved by realising investment losses.

What tax-loss harvesting actually is

If you hold investments in a taxable account (outside an tax-advantaged savings account or pension), gains are subject to Capital Gains Tax when you sell. Tax-loss harvesting is the practice of deliberately selling investments that are showing losses, then immediately buying similar (but not identical) investments, to realise the loss for tax purposes. The loss offsets gains elsewhere in your portfolio, reducing your CGT bill. The practice is legal, the tax authority-compliant, and routine in taxable investing — but less familiar because tax-advantaged savings accounts shelter most retail investing from CGT entirely.

The country CGT landscape

The country CGT annual exempt amount is 3,000 per person, down sharply from 12,300. Above that, gains are taxed at 18% for standard-rate taxpayers and 28% for higher-rate (24% from for most gains, 28% for residential property). For someone realising 15,000 of gains in a year: a local exempt, 12,000 taxable = 2,160 CGT for a standard-rate taxpayers, 3,360 for higher-rate. Tax-loss harvesting becomes relevant at this level and above. Under the exempt amount, there's no tax to offset and no reason to harvest.

When harvesting is worth the admin

Harvesting costs time and transaction fees. The savings are roughly: loss amount × your CGT rate, up to the taxable gains you're offsetting. Realising a 5,000 loss to offset 5,000 of otherwise-taxable gains saves 1,200 for a upper-rate taxpayers (24% CGT). That's real money. But the exercise only pays back if: you actually have realised gains to offset, the loss position is held in a taxable account (not tax-advantaged savings account/pension — nothing to harvest inside those), the transaction costs don't eat the benefit (negligible for modern low-cost platforms), and you can maintain similar market exposure through the replacement investment.

The "bed and breakfast" rule

the tax authority has a specific rule preventing the simplest harvesting trick: you can't sell an investment and buy it back within 30 days and still claim the loss. The rule is called the "bed and breakfast" rule or "30-day rule". To claim the loss, you may need to either wait 30 days before repurchasing, or switch to a different (but similar) investment. Selling Vanguard FTSE Global All Cap and buying iShares MSCI World would qualify as different investments. Selling Vanguard FTSE Global All Cap and buying the same fund back 15 days later would not — the loss would be disallowed.

The replacement problem

The 30-day rule creates a market-exposure gap. For 30 days after harvesting a loss in (say) a equity fund, you either hold cash (risk missing a rally) or hold a different-exposed investment (risk tracking error from your intended allocation). For broad index funds, there are usually close substitutes from different providers — swap Vanguard for iShares, HSBC for Invesco. For narrow or specific holdings, alternatives may not exist and you accept 30 days of market gap. The math only works if the expected tax benefit exceeds the expected cost of the market gap, which on historical volatility roughly breaks even at losses of about 2% of position size.

The wash sale —

The has an equivalent called the "wash sale" rule which is stricter and applies to spouses and retirement account accounts. The country bed-and-breakfast rule is narrower — it doesn't apply to a spouse buying the same investment, and doesn't apply to tax-advantaged savings account or pension account repurchases. This creates a spousal planning angle: one spouse can sell a loss position and the other can buy the same investment, maintaining family exposure while realising the tax loss. It also means moving an investment from a general account to an tax-advantaged savings account after selling at a loss can both harvest the loss and protect future gains — though the tax-advantaged savings account annual subscription limit applies.

Losses you can't use immediately carry forward

If you realise 10,000 in losses in a year but only have 3,000 in gains to offset, the remaining 7,000 of losses carries forward indefinitely to future tax years. This means losses don't go to waste if your current-year gains are small — they accumulate for a future year when you have larger gains. Tracking accumulated losses across tax years is important; the tax authority doesn't do this for you. Each year's self-employment tax filing should include the carry-forward figure.

When harvesting is not worth doing

A few scenarios: your gains for the year are already under the a local exempt amount (nothing to offset); the investment you'd sell at a loss is one you have high conviction will recover and the 30-day window risks missing a rebound; the transaction costs on the specific investment are high (rare on modern platforms); the loss is small enough that the tax saving doesn't justify the admin (below ~1,000 of loss is usually not worth the effort). Over-harvesting — selling at the slightest paper loss — often costs more in transaction drag than it saves in tax.

The year-end timing

Tax year ends 5 April. Harvesting opportunities cluster in the weeks before — both because gains crystallised during the year are fresh in memory, and because the annual CGT exempt amount resets. The trade-off: harvesting in late March gives less market-exposure-gap risk if you're comfortable re-entering in the next tax year, but ignores any losses that materialise in the last 30 days of the tax year. Spreading harvest decisions across the year, rather than concentrating in March, tends to produce better outcomes.

What this calculator shows

The tool estimates the tax savings from harvesting a given loss against a given gain, at a stated CGT rate. It doesn't model the 30-day rule, carry-forward complexity, or platform transaction costs. For a rough sizing of whether a harvest is worth doing, the figure is useful. For a specific transaction, confirm the replacement investment satisfies the bed-and-breakfast rule, account for fees, and keep records for self-employment tax filing.