Losses trading only 1 year

Discussion in 'Accounts & Finance' started by Em80, Feb 11, 2020.

  1. Em80

    Em80 UKBF Newcomer Free Member

    6 0
    Maybe quite a niche question but hopefully someone can help.

    I have been continuously employed up until Feb 2019 when I was made redundant. I decided to start my own sole trader business, to make it easy I started on 5th April 2019. I recently decided to stop trading after making an overall loss of around £500 and will be starting a new PAYE job in March (2020). So when I do my self assessment I will have a Self Employed loss of £500, and a month or two PAYE income.

    My question is, will I/how do I get any kind of tax relief for the loss I made?

    I was also going to use the married allowance for my husband to use a portion of my tax-free allowance for the year, how will this effect things?

    Any help much appreciated!
     
    Posted: Feb 11, 2020 By: Em80 Member since: Feb 11, 2020
    #1
  2. Mr D

    Mr D UKBF Legend Free Member

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    You can claim your loss against your income from employment. However your tax free allowance for the year should mean you don't pay any tax on your March wages.
    Say you earn £1500 that month. Knock off the £12500 tax free allowance - no tax payable.

    Transferring over some of your tax allowance to your husband will allow him to have lower tax. Its not a great deal of money but every little helps.
     
    Posted: Feb 11, 2020 By: Mr D Member since: Feb 12, 2017
    #2
  3. Em80

    Em80 UKBF Newcomer Free Member

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    Thanks Mr D, assuming I start paying tax as normal through PAYE, will it just be refunded? Also do I need to do anything to claim my loss against my income or will this happen automatically once I've completed the self assessment? Sorry I'm a complete SA newbie!
     
    Posted: Feb 11, 2020 By: Em80 Member since: Feb 11, 2020
    #3
  4. Scalloway

    Scalloway UKBF Legend Free Member

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    Posted: Feb 11, 2020 By: Scalloway Member since: Jun 6, 2010
    #4
  5. justintime

    justintime UKBF Regular Free Member

    550 76
    I assume you won't go over the tax threshold therefore won't pay any tax, so there is nothing for you to offset the £500 loss against.

    Did you tell HMRC that you started self employment on 5th April 2019? I would check they're not expecting a tax return for 2018/19, as that was the last day of the previous tax year.

    When you start your employment, make sure you tick box A on the starter form. Box B applies only if you have been in employment, it doesn't include self employment.
     
    Posted: Feb 12, 2020 By: justintime Member since: Apr 12, 2009
    #5
  6. Em80

    Em80 UKBF Newcomer Free Member

    6 0
    Thanks for the advice so far, justintime: I read several articles that said self employment did count and so I have already filled in my starter form and ticked box B. It must have been 6th April then, it was definitely the first day of the new tax year. So for now I'll fill in SA, put loss in Box 33 and hope for a refund from my first PAYE income. It's just a shame that by the look of it if the self employed business had lasted longer and made profit I would heave been able to offset against past or future years.
     
    Posted: Feb 12, 2020 By: Em80 Member since: Feb 11, 2020
    #6
  7. SteLacca

    SteLacca UKBF Ace Free Member

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    You can carry back first year trading losses up to three years against general income.
     
    Posted: Feb 12, 2020 By: SteLacca Member since: Jun 16, 2016
    #7
  8. justintime

    justintime UKBF Regular Free Member

    550 76
    By ticking box B you will pay tax in March (assuming your income is over £1041 for the month, so the £500 can be offset against it BUT you would get that tax back anyway.

    I hadn't considered claiming it back against previous income so that's a good point SteLacca
     
    Posted: Feb 12, 2020 By: justintime Member since: Apr 12, 2009
    #8
  9. Em80

    Em80 UKBF Newcomer Free Member

    6 0
    Thanks again all, SteLacca, as my previous income was PAYE is it possible to claim back against this? If so I assume I would need to write a letter to HMRC as opposed to anything magically happening once I've filled in my SA.
     
    Posted: Feb 12, 2020 By: Em80 Member since: Feb 11, 2020
    #9
  10. SteLacca

    SteLacca UKBF Ace Free Member

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    You can set the loss off against general income (including PAYE) in the previous year. Make the entry in box 34 of the self-employment pages, but expect to have to chase HMRC up.
     
    Posted: Feb 13, 2020 By: SteLacca Member since: Jun 16, 2016
    #10
  11. Em80

    Em80 UKBF Newcomer Free Member

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    Thanks SteLacca, I notice I can only fill in box 34 if I use accrual accounting. My business was a simple playgroup, I bought materials from retail and was paid through an online booking service, there were no delays in payment or credit etc. Can I still use accrual? If it wasn't for trying to claim the losses I would have used Cash basis.
     
    Posted: Feb 13, 2020 By: Em80 Member since: Feb 11, 2020
    #11
  12. Scalloway

    Scalloway UKBF Legend Free Member

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    Yes you can. Using cash basis is merely available as an option for small businsess who find it easier.
     
    Posted: Feb 13, 2020 By: Scalloway Member since: Jun 6, 2010
    #12
  13. Em80

    Em80 UKBF Newcomer Free Member

    6 0
    Perfect, I think I have the answers I need, thank you all so much!
     
    Posted: Feb 14, 2020 By: Em80 Member since: Feb 11, 2020
    #13