Carry back trading losses
Relief for a trading loss can be claimed by reference to earlier tax years, i.e. carried back. The loss for a tax year can be carried back and claimed against income and capital gains of the previous tax year.
From tax year 2020-21, trading losses can be carried back 3 years.
There's no limit to the amount of trading losses that can be carried back to the preceding year. However, a separate £2 million cap applies to the extended period for carrying back losses.
To enter the loss carry back claim in Personal Tax:
-
Enter the total loss to be carried back in:
Self-employment > Computation details > Profit/Loss details > Loss to carry back
or
Partnerships > Taxable profit & losses > Losses > - To be carried back.
-
Enter the reduction in tax** in:
Tax return and computations > Tax adjustments > Decrease in tax due because of adjustments to an earlier year
Note: **You will need to calculate the reduction in tax by comparing the actual tax liability for the earlier year with the liability that would have arisen for the earlier year(s) if the loss now claimed had been included in the tax return for the earlier year(s).
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In either:
Self Employments > Computation Details
or
Partnerships > Taxable profit & losses
click Additional on the toolbar and enter details of the claim on the User tab.
- Click Save. Details of the claim will be included in ‘Any other information’ in the relevant section of the return.
In the tax calculation, you will see the amount entered as a decrease in tax due because of adjustments to an earlier year. The amount of the loss carried back will not be displayed in the calculation.