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Tax Relief For Losses

Do I get any tax relief for my business loss?

The short answer is ‘Very Likely’!

The longer answer involves considering:

  1. Your prior years income and profits
  2. Any other income received in the same year
  3. Your anticipated future income and profit levels

This will enable you to maximise your tax repayment or reduce your future tax payments. Where different tax rates apply, this will affect your optimum claim.

Maximum flexibility is available to sole traders/partners, particularly those in the first 4 years of  trading, or when a partner joins a partnership. Tax paid on past salary, redundancy, or rental profits, for example, may be refunded.

You may arrange the use of your losses to ensure you don’t waste your personal allowance, currently £7,475, and may even be able to offset them against a personal capital gain, such as a property disposal.

As a sole trader/partner, regardless of your claims for income tax and capital gains tax purposes, your loss will reduce your future Class 4 national insurance contributions. And you may use the same loss to reduce your income for Working Tax Credit purposes potentially increasing the payments made to you.

If repayment of past tax isn’t available, your loss may always be carried forward indefinitely to reduce the tax you pay in later years, for when those profits return.


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