Self Assessment and Business Losses: How to Carry Forward

Making a loss is never fun, but it does come with a silver lining — you can use that loss to reduce your tax bill in future years. Here is how.

Types of Loss Relief

Carry forward: Set the loss against future profits from the same trade. The loss is deducted from your profits in the next profitable year, reducing your tax. This is the most common method.

Sideways relief: Set the loss against your other income in the same tax year (for example, employment income). This is available in the first four years of a new business and in limited other circumstances.

Carry back: Set the loss against profits from the previous tax year. Useful if you had a profitable year followed by a loss.

How to Claim on Self Assessment

Report the loss on your Self Assessment return in the self-employment section. Indicate how you want to use the loss:

• Carry forward (default if you do not specify)
• Set against other income (sideways)
• Carry back to previous year

Cash Basis Limitation

If you use cash basis accounting, you can only carry losses forward against future profits from the same business. Sideways relief and carry back are not available on cash basis.

Record Keeping

Keep detailed records of your losses, as HMRC may ask you to justify them years later when you claim the relief.

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