Can I claim loss relief if my business makes a loss?
Answered 11 March 2026
Business Loss Relief in the UK
Yes, you can claim loss relief if your business makes a loss. The rules differ depending on whether you are an individual (income tax) or a company (corporation tax), and the type of business. Here is a structured overview:
What the law says
For Individuals (Income Tax) — Trading Losses (ITA 2007)
There are several routes available:
1. Sideways relief against general income (s.64 ITA 2007) A person who carries on a trade and makes a loss in a tax year may claim for that loss to be deducted in calculating their net income for:
- the loss-making year itself,
- the previous tax year, or
- both tax years.
Where a claim covers both years, the claimant must specify which year the deduction is made first. The claim must be made on or before the first anniversary of the normal self-assessment filing date for the loss-making year.
2. Carry-forward trade loss relief (s.83 ITA 2007) Where relief has not been fully given under s.64 or any other provision, a person may claim for the unrelieved loss to be deducted in calculating their net income for subsequent tax years. However, the deduction can only be made from profits of the same trade.
3. Terminal trade loss relief (s.89 ITA 2007) On permanent cessation of a trade, a person may claim terminal trade loss relief to carry back losses.
4. Early trade losses relief (ss.72–74 ITA 2007) Special relief is available for losses in the early years of a trade.
5. Trading loss as a CGT loss (s.261B TCGA 1992) Where relief is available under s.64 ITA 2007 and a claim is made, any part of the loss not deducted from net income may be treated as an allowable capital gains loss for CGT purposes.
For Individuals — Property Business Losses (ITA 2007)
1. Carry-forward property loss relief (s.118 ITA 2007) Where a person makes a loss in a UK or overseas property business, the loss is automatically carried forward and deducted from profits of the same property business in subsequent tax years.
2. Sideways relief against general income (s.120 ITA 2007) A more limited relief: a person may claim for a property loss to be set against general income for the loss-making year or the next tax year, but only if the loss has a capital allowances connection or the business has a relevant agricultural connection.
For Individuals — Employment Losses (s.128 ITA 2007)
A person in employment or holding an office who makes a loss may claim for that loss to be deducted from general income for:
- the loss-making year,
- the previous tax year, or
- both tax years.
For Companies (Corporation Tax) — Trading Losses (CTA 2010)
1. Relief against total profits in the same/prior period (s.37 CTA 2010) A company making a trading loss may claim for the loss to be deducted from its total profits of:
- the loss-making accounting period, and
- (if the claim so requires) previous accounting periods falling within the 12 months immediately before the loss-making period begins.
The claim must be made within two years of the end of the loss-making period (or such further period as HMRC allows).
2. Carry-forward against subsequent trade profits (CTA 2010) Where a loss is not relieved under s.37 or surrendered as group relief, it is carried forward and treated as a loss of the next accounting period — but relief in the subsequent period requires a claim to be made within two years of the end of that period.
3. UK property business losses (s.62 CTA 2010) A company making a loss in a UK property business receives relief by deduction from its total profits of the same accounting period. Any unrelieved amount is carried forward to the next period.
Restrictions
The legislation contains important restrictions, including:
- No sideways relief for tax-generated losses attributable to the annual investment allowance (s.127A ITA 2007) or tax-generated agricultural expenses (s.127B ITA 2007).
- Ring fence income: sideways relief for a trading loss cannot be set against ring fence income (oil extraction/oil rights) unless the loss itself arises from those activities.
- Cash basis restriction (s.127BA ITA 2007) limits property loss relief where the cash basis applies.
- Trades carried on wholly outside the UK cannot benefit from s.37 CTA 2010 relief.
HMRC guidance / practice
Property losses — practical interaction of s.118 and s.120 (ITA 2007) HMRC guidance confirms that where a property business makes a loss, the default position is carry-forward under s.118 against future property profits. Only the portion of the loss arising from capital allowances or with an agricultural connection qualifies for the sideways claim under s.120. Any unrelieved balance continues to be carried forward.
Sideways relief and personal allowances — a practical warning HMRC guidance illustrates (using the example of "Amit") that claiming sideways property loss relief against general income can result in the loss of personal allowances for the years in question. Taxpayers are advised to consider all consequences carefully before making a claim, including the cash flow advantages of early relief versus the total amount of relief available overall. Importantly, a taxpayer cannot claim only part of the loss sideways — it is all or nothing.
Furnished holiday lettings losses HMRC guidance notes that losses from furnished holiday lettings can be set sideways against general income in the same way as trading losses — either in the year of loss or the year before. Special carry-back rules also apply in the first four years of the business.
Key practical point: The type of relief available, and whether a claim is needed, depends on whether you are an individual or company, the nature of the business (trade, property, employment), and whether the loss is being carried forward, set sideways, or carried back. Time limits for claims are strict — generally one year from the self-assessment filing date (individuals) or two years from the end of the accounting period (companies).
Citation sources
Where a person’s property business makes a loss and tax relief is given under section 118 (carry forward against subsequent property business profits) and in accordance with section 119 (how relief works) of the Income Tax Act, the amount of that loss is carried forward and deducted from future profits of the property business for the following tax year. If part of the loss arises from capital allowances or has an agricultural connection and qualifies for tax relief under section 120 (Deduction
Part 4 Loss relief Chapter 4 Losses from property businesses Property loss relief against general income Deduction of property losses from general income 120 1 A person may make a claim for property loss relief against general income if— a in a tax year (“the loss-making year”) the person makes a loss in a UK property business or overseas property business (whether carried on alone or in partnership), and b the loss has a capital allowances connection or the business has a relevant agricultural
Part 4 Loss relief Chapter 4 Property losses UK property businesses Relief for losses made in UK property business 62 1 This section applies if, in an accounting period, a company carrying on a UK property business makes a loss in the business. 2 Relief for the loss is given to the company under this section. 3 The relief is given by deducting the loss from the company's total profits of the accounting period. 4 Subsections (5) to (5C) apply if— a an amount of the loss is not deducted as mention
lettings) in the current tax year and also ordinary rental business losses of £1,000 brought forward from an earlier tax year. The earlier rental business losses will reduce their ordinary rental business profits of the current year to nil. Then a loss of, say, £500 arising from their furnished holiday lettings can be set off sideways against their general income. If, instead, they let their furnished holiday lettings losses merge into their general rental business result, the outcome would have
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Part 4 Loss relief Chapter 2 Trade losses Trade loss relief against general income Deduction of losses from general income 64 1 A person may make a claim for trade loss relief against general income if the person— a carries on a trade in a tax year, and b makes a loss in the trade in the tax year (“the loss-making year”). 2 The claim is for the loss to be deducted in calculating the person's net income— a for the loss-making year, b for the previous tax year, or c for both tax years. (See Step 2
Part 4 Loss relief Chapter 2 Trade losses Introduction Overview of Chapter 60 1 This Chapter— a provides for trade loss relief against general income (see sections 64 to 70), b provides for early trade losses relief (see sections 72 to 74), c contains provision restricting both those reliefs and capital gains relief (see sections 74ZA to 82), d provides for carry-forward trade loss relief (see sections 83 to 88), e provides for terminal trade loss relief (see sections 89 to 94), f contains restr
Part 4 Loss relief Chapter 5 Losses in an employment or office Employment loss relief against general income 128 1 A person may make a claim for employment loss relief against general income if the person— a is in employment or holds an office in a tax year, and b makes a loss in the employment or office in the tax year (“the loss-making year”). 2 The claim is for the loss to be deducted in calculating the person's net income— a for the loss-making year, b for the previous tax year, or c for bot
Part 4 Loss relief Chapter 2 Trade losses Carry-forward trade loss relief Carry forward against subsequent trade profits 83 1 A person may make a claim for carry-forward trade loss relief if— a the person has made a loss in a trade in a tax year, and b relief for the loss has not been fully given under this Chapter or any other provision of the Income Tax Acts or under section 261B of TCGA 1992 (use of trading loss as a CGT loss). 2 The claim is for the part of the loss for which relief has not
Part 4 Loss relief Chapter 2 Trade losses Relief in loss-making period and carry back relief Relief for trade losses against total profits 37 1 This section applies if, in an accounting period, a company carrying on a trade makes a loss in the trade. 2 The company may make a claim for relief for the loss under this section (but see subsection (5)). 3 If the company makes a claim, the relief is given by deducting the loss from the company's total profits of— a the accounting period in which the l
Amit’s rental business makes a loss of £30,000 in 2015-16 after taking into account capital allowances. For that year Amit has net capital allowances (after deducting balancing charges) of £35,000 for his rental business. The entire loss of £30,000 is therefore eligible for sideways loss claims for 2015-16 and 2016-17 (ITA07/S120). Amit has no rental business losses brought forward under ITA07/S118 at 6 April 2015. But Amit’s total relievable income for the two years together is £20,000 and reli