How do I make a taxable loss claim?

Claims for loss relief

When you make a taxable loss, you may choose how the loss should be relieved by making one several loss relief claims.

Each loss claim comes with its own rules and restrictions but these are the main options you will have:

• Set losses against other income of the same tax year
• Set losses against other income of the previous tax year
• Set the loss against capital gains – this can only be done where you have already set the trade loss against your other income
• In the opening years of a trade (first four tax years of trading), you can claim a special early trade losses relief. This sets your loss back against income of the three preceding tax years, taking the earlier years first (but see below for differences between the cash basis and the accruals basis)
• Set the loss against income from the company if you transferred the trade to a company in exchange for shares in the company – pre-incorporation tax relief
• When you cease business, terminal loss relief can also be available – carry back losses up to three years
• Carry forward losses and set them against future trading income of the same trade

Early trade losses relief

Up to and including 2023/24, only businesses which prepared their accounts under the accruals basis could use early years losses relief. From 2024/25 onwards, those using the cash basis can also claim early trade losses relief.

Restrictions also apply when making certain loss relief claims.

How do I decide which loss relief claims to make?

If you have the choice - i.e. where the order of loss relief claims you need to make is not set out on a statutory basis - you should always look to set your loss against income suffering a higher marginal rate of tax to maximise your refund. This means you should try to use your loss against income taxed at 45%, then income taxed at 40%, and finally income taxed at 20%.

Equally, if you are setting your loss against other income, such as dividend income, you should again look to save tax at the highest marginal rate.

As well as maximising the income tax claim, don't forget national insurance contributions (NICs). You should also look to maximise the loss relief claim for Class 4 NICs, where relevant.

How can TaxAssist Accountants help?

If you’re unsure how to maximise your losses, we have a wealth of experience helping businesses like yours. Call us on 0141 428 5740 or use our online contact form here.

Last updated 25 Aug 2026 | First published 24 May 2021

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This article is intended to inform rather than advise and is based on legislation and practice at the time. Taxpayer’s circumstances do vary and if you feel that the information provided is beneficial it is important that you contact us before implementation. If you take, or do not take action as a result of reading this article, before receiving our written endorsement, we will accept no responsibility for any financial loss incurred.

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