Partnership losses

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Your share is your own loss

For income tax, HMRC’s Partnership Manual says each partner’s share of the trading profit — or loss — is treated as coming from a separate "notional trade" that the partner carries on alone. HMRC’s helpsheet HS227 adds that this notional trade is treated as starting on the date you became a partner (or when you started the trade, if you previously ran it on your own).

That matters for early years relief: your four years run from when you first joined. HMRC’s manual says a partner who leaves and later rejoins doesn’t get a fresh start.

You make your own claims

HMRC is clear that partners are responsible for their own loss relief claims. Once the partnership loss is worked out and shared, each partner chooses the relief that suits their own circumstances:

• sideways relief against their total income (and, if unused, capital gains);
• early years relief;
• carry forward against future profits from the same partnership trade;
• terminal loss relief when they leave or the trade stops.

The deadlines are the same as for sole traders. HMRC’s 2026 partnership notes give 31 January 2028 for sideways and carry-back claims on a 2025/26 loss, and 5 April 2030 for carrying it forward — so 31 January 2029 and 5 April 2031 for a 2026/27 loss.

Where it goes on the return

The partnership pages (SA104S or SA104F) have boxes for losses brought forward and used, your adjusted loss for the year, the loss set against other income, the loss carried back, and the total loss to carry forward. The notes repeat the cap on reliefs next to these boxes. See where losses go on your return.

Limited and non-active partners

There are extra restrictions on sideways relief and relief against gains for partners who aren’t actively involved:

• Capital contribution limits. For limited partners in any year (section 104), and for non-active partners in the early tax years (section 110), relief is broadly limited to the capital they have contributed and are at risk of losing.
• £25,000 a year. Section 103C caps the total sideways relief and capital gains relief for limited partners, non-active general partners and non-active LLP members at £25,000 a year. HMRC’s manual says this applies after the capital contribution limits.
• Non-active means spending less than an average of 10 hours a week personally on the trade’s commercial activities.

None of these restrict relief against profits of the same trade. HMRC’s manual says the restrictions don’t apply to professions or vocations.

Sources

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

1. HMRC Partnership Manual PM163080: Partner’s notional trade (gov.uk)
2. HMRC Partnership Manual PM191300: Claims that affect a partner’s tax (gov.uk)
3. HMRC Partnership Manual PM191000: Loss claims and restrictions (gov.uk)
4. HMRC Partnership Manual PM193000: The £25,000 annual limit (gov.uk)
5. Income Tax Act 2007, section 103C (legislation.gov.uk)
6. Income Tax Act 2007, section 104 (limited partners) (legislation.gov.uk)
7. Income Tax Act 2007, section 110 (non-active partners in early years) (legislation.gov.uk)
8. HMRC helpsheet HS227: Relief for trading losses (2026) (gov.uk)
9. HMRC: SA104S Partnership (short) pages and notes (gov.uk)
10. HMRC: SA104F Partnership (full) pages and notes (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.
• 11Carrying a trading loss forwardA trading loss you don’t use in other ways can be carried forward and set against later profits of the same trade, first available profits first, for as long as the trade continues.
• 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.