Tax Losses – 3 Ways To Maximise Your Tax Benefits

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Tax Losses - 3 Ways To Maximise Your Tax Benefits And Minimise Your Tax Payments!

I ever you're in the unlucky position where the expenses that your business can deduct from its profits exceed its income, then tax losses arise.

There a number of ways that the loss might be used depending on the type of business, and whether you are a sole trader or limited company.

This is a complex subject which should be tackled with the help of your accountant.  So that you get the detail of your claim right and accepted by the Taxman.

We do hope that this blog post will give you some ideas on what you can discuss with your accountant.  Plus peace of mind that if you suffer tax losses in your business, these can be used to help your future business cash flows.

With a bit of understanding of the rules and effort on your part, you can ensure your tax losses are fully allowed by the Taxman.

Tax Losses - 3 Ways To Manage The Pain!

Tax Losses - 3 Ways To Maximise Your Tax Benefits

Tax Losses - 3 Ways To Maximise Your Tax Benefits


These are our 3 favourite tips for making claims for tax losses that the Taxman will allow:

Tax Losses 1 - Trading losses carried forward

Where a company incurs a trading loss, then unless another type of tax loss claim is made, then this loss will be carried forward automatically and set against the next available profits of the same trade.

For a sole trader, trading losses will also be carried forward and set against the next available profits of the same trade.  This happens even if the sole trader's personal allowance is wasted.

Tax Losses 2 - Trading losses carried sideways

For companies, if they have made a trading loss in any particular accounting period, they can use these losses to mitigate other profits and gains they have made, such as capital gains on the sale of assets.

So if you have trading losses of say £10,000 in the year and taxable profits from a capital gain of £5,000, you can set the £5,000 from the gain against the losses, and carry forward the remaining tax losses against taxable profits you hope to make in the future etc.

Similarly sole traders are also able to set their trading losses against other taxable incomes realised in the same year.  However, limits for set off for sole traders do apply.  Do check what the latest allowances are from HMRC with your accountant.

Tax Losses 3 - Trading losses carried back

Once a company's trading loss has been fully utilised against any other profits or gains made in the same year as noted above, any remaining balance can be carried back and set against the corporation tax levied falling in the previous 12 months.

So if you have trading losses of say £10,000 in year 2 and taxable profits of £5,000 in year 1, you can set £5,000 of the losses against the profits of year 1, and carry forward the remaining tax losses against taxable profits you hope to make in year 3 etc.

Sole traders can also carry trading losses back to the previous year, subject to certain monetary limits.  Do check what the latest allowances are from HMRC with your accountant to make sure your claim does not get rejected by the Taxman.


Remember - This is a complex subject which should be tackled with the help of your accountant.  We do hope that this blog post will give you some ideas on what you can discuss with them.  This will allow you to calmly make sensible business decisions on what type of or mixture of claims you can make that the Taxman will accept.

Remember too - There are other business losses which can be relieved against your tax bill relating to termination of businesses; property, capital losses; losses within groups of companies etc.  Again, whether you could get some relief for a situation like those described above or any others, ask your accountant the question as to what to do!

Our Tax Losses Call To Action

It is clear that tax losses are not at the fore-front of most business owners thoughts when looking to grow their sales, and trying to deliver products or services to their customers.

This seems like the province of bigger companies who have full time qualified accountants to look after their affairs and minimise their tax payments.

However a bit of time reviewing with your accountant what you can do with your tax losses should allow you to ensure you only pay the tax you need to each year.  But do make sure your accounting system works to ensure any tax losses are fully allowable for tax purposes.

If there's one message we want you take away from this post is to not shy away from making reasonable claims for your tax losses.  If done with care and the proper supporting paperwork these will be allowed by the Taxman.

If you know of any other great tips for making tax losses claims that can be shared with our readers then let us know via the comments or through LinkedIn.

The PJW Call To Action

If you want to talk to us about using more of our top tax tips to help your business save real money then do the following:

  1. subscribe to our blog
  2. contact us via LinkedIn
  3. email us at
  4. call us on 01889 586431
  5. read all our tax tips on Twitter and subscribe to our very tax tips stuffed TweetJukebox

If you like this set of tax tips then please do share it across Twitter, Tumblr, Facebook, LinkedIn and Google+ – where you will find us active on each social media platform!

Remember - Don’t Leave a TIP with the Taxman!

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