Tax Action tips: Trading losses for self-employed or partnerships

First published 15 March 2013 • Updated 21 February 2018

TaxCalc’s last Tax Action tips blog features tips for business owners trading losses…

If you are self-employed or in a partnership that has made losses be sure to utilise them effectively.  You have a few options: 

  • Trading losses made in the current tax year can be offset against other taxable income (such as employment earnings or bank interest) in the current or preceding tax year.  Relief is obtained by the total of the loss being deducted from the taxpayers taxable income.
  • Trading losses can be carried forward to future years and used against profits.  However, be aware that if you carry the losses forward they can only be used against profits of that same trade.  So they can not be set off against any other kind of income like you can if using the losses in the year they arise.
  • Additional rules are in place for trading losses arising in the first 4 years of trading.  If a loss is made in any of the first 4 years of trading then the loss carry back rules against general income are extended to the preceding 3 years instead of 1.

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About the author
Nick Green
Nick Green
Nick Green is a financial journalist writing for Unbiased.co.uk, the site that has helped over 10 million people find financial, business and legal advice. Nick has been writing professionally on money and business topics for over 15 years, and has previously written for leading accountancy firms PKF and BDO.