Tax returns » Using loss in self-employment against income from earlier tax years. » Go to message
In the tax year 2016-17, I was an employee up to 30 June 2016. Since 1 July 2016, I setup my own business offering professional service (*not* in any of the “special” professions – lawyers, farmers, artists). I am registered as a sole trader. My accounting periods are 1 Jul 2016 to 5 Apr 2017 (9 months), then 6 Apr 2017 to 5 Apr 2018, etc. I am using the accrual basis of accounting.

In 2016-17, I made a loss, say for example, £1000 (net loss from allowable expenses, plus capital allowances). I want to use this against income as an employee from 2013-14 (HS227 Losses (2017) – I have read that, but still not very sure).

Let's say my tax calculation from 2013-14 (figures entirely made up):

Total income (total income minus personal allowance) on which tax is due = £11000.00
Income Tax charged = £2200

Taxable income in 2013-14 minus loss in 2016-17 = 11000-1000 = £10000
Income tax ought to be charged = 10000 x 20% = £2000
Difference to claim = 2200-2000 = £200

I want to check that this is the correct way to do this in my tax return: Go to my online tax return form > adjustments to tax due > “decrease in tax due because of adjustments to an earlier year”, I should enter £200 in that box.

Is my employment income in 2013-14 the earliest I can use? Is there anything else I will need to do to claim this loss? I am not able to make changes to my 2013-14 tax return.

Thank you for your help.
Tax returns » Accounting periods, basis periods and overlap profits or loss » Go to message
Thanks for your reply.

That is a good tip to run accounts to 31st March.
Tax returns » Accounting periods, basis periods and overlap profits or loss » Go to message
I am a little confused about accounting periods and basis periods after reading guidance HS222 for the tax year 6 Apr 2016 to 5 Apr 2017.

I run a business from my home offering professional consultancy service (similar to lawyers, architects, etc.). I do not have any physical items (that is, no goods or stocks) to sell. Assets and expenses comprise computers, office equipment and stationery. I registered as a sole-trader and my business began on 1 July 2016. I am not VAT-registered. I am using the accruals basis of accounting.

Can I set my accounting period to align with the tax years and to avoid overlap profits or loss? This means:
Year 1: 1 Jul 2016 to 5 Apr 2017 (9 months)
Year 2: 6 Apr 2017 to 5 Apr 2018 (12 months)
Year 3: 6 Apr 2018 to 5 Apr 2019 (12 months)
and so forth.

Many thanks.