Carrying a trading loss forward

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How carry-forward works

Section 83 of the Income Tax Act 2007 lets you claim carry-forward relief for a trading loss that hasn’t been fully relieved in other ways (sideways relief, early years relief, relief against gains and so on). The loss is then deducted from profits of the same trade — and only those profits — in later tax years. Section 84 sets the order: the next year’s profits first, then the following year, and so on until the loss is used up.

2026/27 trading loss (not used elsewhere)	minus (£9,000)
2027/28 trading profit	£4,000
Loss used in 2027/28	minus (£4,000)
2027/28 taxable trading profit	£0
2028/29 trading profit	£12,000
Rest of the loss used in 2028/29	minus (£5,000)
2028/29 taxable trading profit	£7,000

HMRC’s manual adds that the loss must go against the first year in which a profit arises — you can’t skip a year. If profits run out, it can also be set against interest and dividends that would otherwise be trading receipts.

Conditions

• Same trade, same owner. HMRC’s manual says carry-forward is allowed only while the ownership and identity of the business stay the same as when the loss was made. If you incorporate and take shares for the business, a different relief (section 86) can let you use the losses against income from the company.
• Not restricted by the cap. Losses set against profits of the same trade are outside the cap on income tax reliefs and outside the non-active trader limit.
• Commercial basis rules don’t stop it. HMRC’s manual says that even where sideways relief is denied (for example under the farming rules), carry-forward against future profits of the same trade is still allowed.

Claiming, and the deadline

Carry-forward relief is framed as a claim, and HMRC wants it made in a return where possible. The time limit is the general one in section 43 of the Taxes Management Act 1970: 4 years from the end of the tax year the claim relates to. HMRC’s 2026 helpsheet and partnership notes apply this to the year of the loss — for a 2025/26 loss, 5 April 2030.

Carry-forward claim for a 2026/27 loss by 5 April 2031

On the 2025–26 self-employment pages, there is a box for losses brought forward from earlier years used against this year’s profits, and another for the total loss to carry forward after all other set-offs — including unused losses brought forward. Keep a running record of the balance year by year.

Transition profit

If you have transition profit from the 2023/24 basis period changes being spread over the years to 2027/28, HMRC’s 2025–26 notes say you can set losses brought forward against that year’s share of the transition profit, with a separate box on the full self-employment pages. Any loss left after that can go against your adjusted profit or be carried forward.

Sources

Checked 4 October 2026 for the 2026/27 tax year. We read these primary sources for this guide:

1. Income Tax Act 2007, section 83 (legislation.gov.uk)
2. Income Tax Act 2007, section 84 (legislation.gov.uk)
3. Taxes Management Act 1970, section 43 (legislation.gov.uk)
4. HMRC Business Income Manual BIM85060: Carry forward of losses (gov.uk)
5. HMRC Business Income Manual BIM85070: Claims involving more than one year (gov.uk)
6. HMRC Business Income Manual BIM85075: Time limits for claims (gov.uk)
7. HMRC helpsheet HS227: Relief for trading losses (2026) (gov.uk)
8. HMRC: SA103F Self-employment (full) notes 2026 (gov.uk)

Contains public sector information licensed under the Open Government Licence v3.0. This guide adapts and summarises that information in our own words. taxloss.co.uk is an independent guide. It is not affiliated with, endorsed by or connected to HM Revenue & Customs (HMRC) or the UK Government. Spotted something out of date? Tell us.

More on self-employed & partnership losses

• 09Self-employed losses: your options at a glanceIf your trade, profession or vocation makes a loss, income tax law gives you several ways to use it — against other income this year or last, against capital gains, back against earlier years at the start or end of a business, or forward against future profits.
• 10Setting a trading loss against other income (sideways relief)Sideways relief lets you set a trading loss against your total income — a salary, pension, savings or rental income — for the tax year of the loss, the year before, or both. Any unused part can be set against capital gains.
• 12Early years loss relief: losses in the first four yearsA loss in the first four tax years of a new trade can be carried back against your total income of the three tax years before the loss, earliest year first — often giving a repayment of tax you paid as an employee.
• 13Terminal loss relief when a business stopsWhen you permanently stop trading, the loss of your final 12 months can be carried back against profits of the same trade in the final tax year and the three tax years before it, latest year first.
• 14The cap on loss relief and other restrictionsSeveral loss reliefs against general income are capped at £50,000 or 25% of adjusted total income, whichever is higher. Non-active traders and some partners face a separate £25,000 limit, and uncommercial trades get no sideways relief at all.
• 15Losses under the cash basisFrom 2024/25 the cash basis is the default way for sole traders and most partnerships to work out profits — and the old restriction on cash-basis trading losses has gone. Landlords are different: property losses on the cash basis still can’t be set against other income.
• 16Partnership lossesWhen a partnership makes a loss, each partner is treated as having a loss from their own notional trade and claims relief for their share on their own tax return. Limited and non-active partners face extra limits.