Tax and NI

8. Offsetting Losses

8.1 If you are self-employed, you can offset trading losses against other income received in that tax year or the preceding year, such as earnings from a job or income from investments, plus any capital gains arising in that year.

• Alternatively, losses can be carried forward to offset against future profits from the same trade.Losses in the first four years, or in the last year, may also be carried back up to three years.

8.2 Limited companies can also offset their trading losses against other income in the accounting period.

• Losses incurred in the initial accounting period of a new company can be carried forward to reduce future tax bills, or carried back for one year to reclaim tax already paid.There is a similar loss relief when a business is closed down but losses can then be carried for three years.