What is sideways loss relief for self-employed people?
Answered 11 March 2026
Here is a comprehensive explanation of sideways loss relief for self-employed people.
Sideways Loss Relief for the Self-Employed
What the law says
Definition "Sideways relief" is the term used for two specific forms of trade loss relief available to individuals:
- Trade loss relief against general income (s.64 ITA 2007)
- Early trade losses relief (s.72 ITA 2007)
It can also extend to setting trade losses against capital gains under s.261B TCGA 1992.
1. Relief against general income — s.64 ITA 2007
A self-employed person may claim for a trade loss to be deducted in calculating their net income:
- for the loss-making year,
- for the previous tax year, or
- for both tax years.
The claim must be made on or before the first anniversary of the normal self-assessment filing date for the loss-making year.
2. Early trade losses relief — s.72 ITA 2007
An individual may claim this relief if they make a loss in a trade:
- in the tax year in which the trade is first carried on, or
- in any of the next 3 tax years.
The claim is for the loss to be deducted against the individual's net income for the 3 tax years before the one in which the loss is made (i.e., a three-year carry-back).
3. Extension to capital gains — s.261B TCGA 1992
Where a person claims relief under s.64 ITA 2007 but does not have enough income to offset the loss in full, the excess can be treated as a capital loss to the extent there are chargeable gains for the year.
Cap on reliefs — s.24A ITA 2007
From 6 April 2013, a general reliefs cap limits the total amount of sideways loss relief an individual can claim in any tax year to the greater of:
- £50,000, or
- 25% of the individual's adjusted total income.
The cap does not apply to trade losses relieved against profits of the same trade.
Additionally, for non-active traders (those not involved on a day-to-day basis), a separate cap of £25,000 applies to sideways and capital gains relief combined.
HMRC guidance / practice
What counts as "sideways relief" HMRC describes sideways loss relief as broadly covering:
- Setting trade losses against general income under s.64 ITA 2007 (same year or prior year), and
- Setting trade losses against capital gains under s.261B TCGA 1992.
Full amount rule — no partial claims HMRC confirms that any claim must be for the full amount of the loss not already utilised. Partial claims are not permitted (Butt v Haxby [1982] 56TC547). This means a loss set against income for a particular year must be set as far as possible against that income, even if this wastes personal allowances.
Each pound relieved only once A loss relieved under s.64 or s.72 ITA 2007 cannot be relieved again in a subsequent year (s.206 ITTOIA 2005), and cannot be claimed under any other loss relief provision (s.63 ITA 2007).
Commerciality requirement There is no relief under s.64 ITA 2007 unless the trade is carried on throughout the basis period:
- on a commercial basis, and
- with a view to the realisation of profits (s.66(2) ITA 2007).
Cash basis restriction Sideways loss relief under s.64 and s.72 ITA 2007 is not available for losses of 2013-14 to 2023-24 calculated using the cash basis.
How claims are made
- A claim to set losses against income of the same year (s.64(2)(a)) must be made in the self-assessment return.
- Claims for carry-back (s.64(2)(b)/(c)) and early years relief (s.72) can be made as stand-alone claims, even before the return for the loss year is submitted.
Summary table
| Relief | Provision | Direction | Who can claim |
|---|---|---|---|
| Against general income (same/prior year) | s.64 ITA 2007 | Sideways/carry-back 1 year | Any trader |
| Early years carry-back (3 years) | s.72 ITA 2007 | Carry-back 3 years | Individuals in first 4 years of trade |
| Against capital gains | s.261B TCGA 1992 | Sideways | Any trader (excess after s.64 claim) |
Citation sources
Part 4 Loss relief Chapter 2 Trade losses General restrictions on sideways relief and capital gains relief Reliefs in any tax year not to exceed cap for tax year 74A 1 This section applies if— a during a tax year an individual carries on one or more trades, otherwise than as a partner in a firm, in a non-active capacity (see section 74C), and b the individual makes a loss in any of those trades (an “affected loss”) in that tax year. 2 There is a restriction on the amount of sideways relief and c
S60-S100 Income Tax Act 2007 (ITA 2007) The Taxes Acts provide several different ways in which losses made by those carrying on a trade (including a profession or vocation) may be relieved. These are as follows: S64 ITA 2007 - against the person’s general income of the year the loss was made or of the previous year, see BIM85015. This relief is not available for losses of 2013-14 to 2023-24 calculated using cash basis, see BIM70000 onwards. S72 ITA 2007 - by reference to the individual’s general
S66 Income Tax Act 2007 (ITA 2007) There is no relief under S64 ITA 2007 unless the trade (including a profession or vocation) is commercial, that is, unless it is carried on throughout the basis period for the tax year: on a commercial basis, and with the view to the realisation of profits of the trade (S66(2) ITA 2007). Before applying this test in S66(2) ITA 2007 the first matter to be considered is whether the activities that are being carried on actually amount to trading. If the activities
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 3 Restrictions on trade loss relief for certain partners Introduction Meaning of “sideways relief”, “capital gains relief” and “firm” 103 1 For the purposes of this Chapter sideways relief is— a trade loss relief against general income (see sections 64 to 70), or b early trade losses relief (see sections 72 to 74). 2 For the purposes of this Chapter— a capital gains relief is, in relation to a loss, the treatment of the loss as an allowable loss by virtue of section 26
Sch1B Para2 Taxes Management Act 1970 (TMA 1970), S64, S72, S83, S89 Income Tax Act 2007 (ITA 2007) Where a person makes a claim requiring relief for a loss incurred in a later year to be given by reference to the tax payable in an earlier year, the claims do not have to be made in a return. Thus they can be made as stand-alone claims. We take the view that such a claim can even be made before the return, for the year in which the loss arose, is submitted. The claims involved are: Carry back of
Income Tax Act 2007 (ITA 2007): S64 - Relief against general income for the same and/or the previous year. (BIM85015) S72 - Relief for losses in the first four years of trade. (BIM85045) S83 - Relief against subsequent trade profits. (BIM85060) S86 - Relief for losses where trade is transferred to a company. (BIM85060) S89 - Terminal loss relief. (BIM85055) In deciding whether a loss relief claim is validly made, it is necessary to understand how different claims interact. A number of general po
The loss reliefs which are subject to restriction are:- Sideways relief as defined at S60(4) ITA 2007. This is broadly the setting of trade losses against general income under S64 ITA 2007 (BIM85015) and S72 ITA 2007 (BIM85045). Setting trade losses against capital gains for the same, or preceding, year under S261B Taxation of Chargeable Gains Act 1992 (BIM85025). Relief against income and gains, 1 and 2 above respectively, is commonly referred to as ‘sideways loss relief’. The non-active trader
Part 4 Loss relief Chapter 2 Trade losses Early trade losses relief Relief for individuals for losses in first 4 years of trade 72 1 An individual may make a claim for early trade losses relief if the individual makes a loss in a trade— a in the tax year in which the trade is first carried on by the individual, or b in any of the next 3 tax years. 2 The claim is for the loss to be deducted in calculating the individual's net income for the 3 tax years before the one in which the loss is made (se
S24A Income Tax Act 2007 (ITA 2007) From 6 April 2013 a general reliefs cap was introduced to restrict the amount of certain reliefs that an individual can claim against their income for any given tax year. Sideways loss relief comes within the reliefs cap. Both S64 and S72 ITA 2007 are included in the list of reliefs at s24A(6) ITA 2007. The cap limits individuals to a maximum deduction of certain reliefs in any given tax year to the greater of: £50,000 25% of the individual’s ‘adjusted total i
S64 Income Tax Act 2007 (ITA 2007), S261B Taxation of Chargeable Gains Act 1992 (TCGA 1992) Relief for losses made by a person (individual, partner or trustee) in carrying on a trade (including a profession or vocation), or in employment may include a set-off against chargeable gains. (In relation to employment, see EIM31655 and BIM85090.) A person who makes a loss and claims relief under S64 ITA 2007, but who does not have enough income to offset that loss in full, can have the excess treated a