Trading Losses and Loss Claims
What are trading losses?
A trading loss occurs when your allowable business expenses exceed your trading income in a tax year. If you’re self-employed or have a property business and make a loss, HMRC allows you to claim that loss to reduce your tax liability.
How can you use a trading loss?
There are several ways to use a trading loss:
1. Set off against other income (same tax year)
You can claim the loss against your:
- Salary
- Property income
- Savings and investment income
This is called sideways relief.
2. Carry the loss back (previous tax year)
You can claim the loss against total income in the previous tax year, if you were also self-employed then. This can generate a tax refund.
3. Carry the loss forward (future years)
If you don’t or can’t use the loss now, you can carry it forward to reduce your taxable profits in future years from the same trade.
Important Rules
- You must claim within 12 months of the Self Assessment deadline for the year in which the loss occurred.
- Carry forward losses can only be used against profits from the same trade.
- If you’ve ceased trading, special rules apply for terminal loss relief.
Entering your Trading Loss into QuickFile
You can notify HMRC about a trading loss or loss claim from your Self-Assesmment Workflow by clicking the Options menu and then View / Amend Losses Brought Forward.
From the losses overview screen you will see your losses brought-forward and loss claims for each tax year and business income source. When you click the button Record Loss Brought Forward you will then be able to enters specific details in regards to the loss.
Once saved this information is immediately sent to HMRC. You can amend or delete any loss up until the point your tax year is finalised.
Practical Example of a Brought Forward Loss
You made a £3,000 trading loss in 2023/24. You choose to carry it forward.
- In 2024/25, you make £5,000 profit.
- You deduct the £3,000 loss, so your taxable profit is £2,000.