What is trading loss carry-back relief in the UK?

Under Section 72 ITA 2007, a self-employed trader can carry a trading loss back one year and set it against trading profits of the same trade in the preceding tax year. This produces a tax refund on income tax already paid. The claim must be made within 12 months of the 31 January filing deadline for the loss year (i.e. within 12 months of 31 January 2028 for a 2026/27 loss). You amend the prior year Self Assessment return to claim the relief.

What is the difference between S64 sideways relief and S72 carry-back?

Section 64 ITA 2007 (sideways relief) lets you set a trading loss against any income in the same tax year or the previous year. Section 72 (carry-back) specifically sets the loss against profits of the same trade in the preceding year. S64 sideways relief can produce a larger refund if you have substantial non-trading income (salary, rental) in the prior year, whereas S72 carry-back only offsets against trading profits. The two claims interact: you typically use S64 first if you want to use the loss in the current year, then carry back the balance under S72.

Can early-year trading losses be carried back further than one year?

Yes. Under Section 72(4) ITA 2007, losses made in the first four years of a trade can be carried back against general income of the three preceding tax years (on a FIFO basis — earliest year first). This is sometimes called the 'new business' loss relief rule. It allowed businesses hit by COVID-19 to access a similar extended carry-back temporarily (2020/21 and 2021/22 losses could be carried back three years under temporary legislation, but that extension has now ended).

Does loss carry-back affect my Class 4 NIC liability?

Yes. If you carry back a trading loss to reduce trading profits in the prior year, your Class 4 NIC liability for that year is also reduced (since Class 4 NIC is calculated on trading profits). This increases the total refund available. Class 4 NIC rates 2026/27: 6% on profits between £12,570 and £50,270, and 2% above £50,270. Your refund should include both the income tax reduction and the Class 4 NIC reduction for the prior year.

How do I claim loss carry-back relief from HMRC?

You claim by amending your prior year Self Assessment return. Log into your HMRC online account, select the prior year return, and update the trading profit figure to reflect the loss set-off. HMRC will then recalculate your liability and issue a repayment. Alternatively, you can write to HMRC with a formal amended return. The time limit is 12 months from the 31 January following the loss year. For a 2025/26 loss, amend the 2024/25 return by 31 January 2028.

Can a partnership carry back trading losses?

Yes — each individual partner claims loss relief in their own Self Assessment. The loss is allocated to partners in their profit-sharing ratio. Limited partners face a restriction: they can only offset losses up to the amount of their capital contribution (the 'capital contribution limit'). Salaried partners in LLPs who are treated as employees for tax purposes cannot access trading loss reliefs. General partners in traditional partnerships have no such restriction.

What happens to losses I cannot carry back?

Losses that cannot be carried back (e.g. because the prior year had no profits, or the carry-back claim is not made) are carried forward automatically against future profits of the same trade under Section 83 ITA 2007. There is no time limit on carried-forward losses. However, from April 2017, corporate loss carry-forwards are subject to a 50% restriction on profits above £5 million (for companies). For sole traders and partnerships, carried-forward losses can be used in full against future trading profits of the same trade.

Loss Carry Back Calculator UK 2026

Last updated: March 2026

UK Trading Loss Carry Back Calculator 2026

Model S72 carry-back relief — get an estimated income tax & NIC refund

Current Year Trading Loss (£) Your net trading loss for the current tax year (2025/26 or 2026/27)

Prior Year 1 Trading Profit (£) Taxable profit from the preceding year (after expenses, before loss relief)

Prior Year 2 Trading Profit (£) — Early Trade Losses Only Only available if this is within the first 4 years of trade (S72 extended carry-back)

Income Tax Already Paid on Prior Year Profits (£) From your SA302 or tax calculation for the prior year

Other Income in Prior Year (£) — salary, rental etc. Helps calculate your marginal tax rate in the prior year

Trading Loss Relief Options 2026

Relief Type	Legislation	How It Works
Sideways relief (current year)	S64 ITA 2007	Set loss against any income in the same tax year
Sideways relief (prior year)	S64 ITA 2007	Set loss against any income of the preceding year
Carry-back (same trade)	S72 ITA 2007	Set loss against trading profits of preceding year
Early trade carry-back (3 years)	S72(4) ITA 2007	First 4 years of trade — carry back 3 years (FIFO)
Carry forward	S83 ITA 2007	Automatic — set against future profits, no time limit

Expert Guide: Trading Loss Relief for Sole Traders

1. S64 Sideways Relief vs S72 Carry-Back — Which Is Better?

S64 ITA 2007 (sideways relief) is broader: it allows the loss to be set against any income in the loss year or the prior year — including employment income, rental income, pension income, bank interest. This is powerful if you had a salary alongside your self-employment. S72 carry-back is narrower: it only sets the loss against trading profits of the same trade in the preceding year.

The choice depends on your prior year income mix. If you had £30,000 salary and £10,000 trading profit in the prior year, S64 sideways relief (prior year) can absorb a £40,000 loss — far more than S72's £10,000 cap. However, both claims require the loss to actually arise in the current tax year. You cannot cherry-pick which income to offset — relief under S64 is applied in the most tax-efficient sequence by HMRC. Note: S64 relief is wasted against income already sheltered by the personal allowance (£12,570).

2. Early Trade Loss Relief — Section 72(4), First 4 Years

One of the most generous reliefs in ITTOIA/ITA: traders in the first four years of a new trade can carry losses back three years (not just one). The loss is set against general income (not just trading income) of those earlier years, earliest year first (FIFO). This means a new business that fails or struggles early can access income tax refunds from pre-business employment years.

Example: A consultant leaves employment in April 2023 to start a business. In 2025/26 (year 3 of trade) they make a £25,000 loss. Under S72(4) they can carry that back to 2022/23, 2023/24, and 2024/25 against general income in those years. If they earned £50,000 as an employee in 2022/23, they could recover up to £10,000 income tax (40% × £25,000) from that year. Time limit: the claim must be made within 12 months of the 31 January following the loss year — so by 31 January 2028 for a 2025/26 loss.

3. Class 4 NIC and the Interaction with Loss Relief

Class 4 National Insurance Contributions are levied on self-employed trading profits above £12,570. The rates for 2026/27 are 6% on profits between £12,570 and £50,270, and 2% above £50,270. When you carry back a trading loss to reduce your prior year's trading profit, the taxable trading profit figure used for Class 4 NIC is also reduced — producing a NIC refund in addition to the income tax refund.

Example: Prior year trading profit £35,000. Loss carried back: £20,000. Reduced profit: £15,000. Original Class 4 NIC: (£35,000 − £12,570) × 8% = £1,794. New Class 4 NIC: (£15,000 − £12,570) × 8% = £194. NIC refund: £1,600. Note: S72 carry-back only works against trading profits — if you use S64 sideways relief against non-trading income, there is no NIC benefit (since NIC only applies to trading profits).

4. Partnership Loss Allocation and Limited Partner Rules

In a traditional partnership (general partnership or LLP with active partners), losses are allocated to individual partners in their profit-sharing ratio. Each partner then claims relief in their own Self Assessment return — they can use sideways relief, carry-back or carry-forward independently. One partner might carry back while another carries forward.

Limited partners face a cap: they can only offset trading losses against income up to the amount of their capital contribution to the partnership at the end of the tax year in which the loss arises. This prevents "loss farming" through limited partnerships. Salaried members of an LLP who are treated as employed under the disguised employment rules (ITTOIA S863A) cannot access trading loss reliefs at all — their share is treated as employment income. Sleeping/inactive partners in a general partnership may also face restrictions under anti-avoidance rules.

5. How to Claim: Amending Your Prior Year Self Assessment

The mechanics of claiming S72 carry-back relief: (1) Complete your Self Assessment return for the loss year, declaring the trading loss. (2) On the self-employment pages, indicate you wish to carry the loss back. (3) HMRC then amends the prior year — in practice, you typically also need to amend the prior year return directly. Log into HMRC online services (Government Gateway), select the prior year, and amend the trading profit figure to show the reduced amount after loss set-off. (4) HMRC issues a repayment to your bank account (usually within 2–8 weeks of processing).

Time limits: The claim for carry-back must be made within 12 months of the 31 January filing deadline following the loss year. For 2025/26 losses: deadline is 31 January 2028. What if you miss the deadline? You cannot carry back after the time limit expires. The loss must instead be carried forward. HMRC will not exercise discretion on missed carry-back claims. Paper returns: If you file on paper, include a loss carry-back claim with your return using box 78 (loss carry back) on the Self Assessment return.

6. Overlap Profits and Terminal Loss Relief

Overlap profits arise when a business starts with a non-April accounting year-end — HMRC taxes the same profits twice in the opening years, with the duplicated amount recorded as "overlap relief" to be deducted when the trade ceases or changes its accounting year. From April 2024, the basis period reform (moving to a tax-year basis) was implemented, and businesses were required to spread any transitional profits. Overlap relief accumulated before April 2024 was given automatically on transition.

Terminal loss relief (S89 ITA 2007): When a trade ceases, any loss made in the final 12 months can be carried back against trading profits of the preceding three years (on a LIFO basis — most recent year first). This is different from the standard one-year carry-back. Terminal loss relief is particularly valuable for long-running businesses with profitable prior years. The terminal loss is calculated as losses in the tax year of cessation plus any unrelieved losses in the preceding year apportioned to the final 12 months.

7. Practical Planning: Current Year vs Prior Year — Which Maximises Your Refund?

The decision of when and where to offset a trading loss requires comparing marginal tax rates across years. If your prior year profits were taxed at 40% and your current year income puts you in the 20% bracket, carry-back produces a £0.40 refund per £1 of loss vs a £0.20 saving from current-year offset. Conversely, if you anticipate future profits in the higher rate band, carrying forward may save more tax overall — though this defers the cash benefit.

Cash flow argument: Carry-back produces an immediate cash refund from HMRC. A £20,000 loss carried back to a year with 40% marginal rate produces an £8,000 refund now. Carrying forward the same loss against a future 20% rate saves £4,000 — eventually. The time-value difference on £4,000 over several years can be significant for a cash-strapped business. Personal allowance waste: Do not use relief against income that is already within the personal allowance (£12,570) — this wastes the relief entirely. HMRC does not allow selective use of relief to maximise the personal allowance.

Expert Reviewed — This calculator reflects S64 and S72 ITA 2007 rules and 2026/27 NIC rates. Last verified: March 2026.

Worked Examples: Loss Carry Back

Example 1: Standard One-Year Carry Back (S72)

Maria (sole trader, plumber) makes a £20,000 loss in 2025/26. In 2024/25 she had £40,000 trading profit.

Loss carried back: £20,000 (capped at prior year profit £40,000)
Reduced 2024/25 profit: £40,000 − £20,000 = £20,000
Income tax refund: tax on £40K − tax on £20K = £10,486 − £2,886 = £7,600
Class 4 NIC refund: NIC on £40K − NIC on £20K = £2,194 − £598 = £1,596
Total refund: ~£9,196
Loss carried forward: £0

Example 2: Early Trade Carry Back — 3 Years (S72(4))

James starts a tech startup in 2023/24. In 2025/26 (year 3 of trade) he makes a £35,000 loss. Prior year trading profits are nil, but he had £60,000 employment income in 2022/23.

Year 1 carry-back: 2024/25 — nil profit, no relief available
Year 2 carry-back: 2023/24 — nil trading profit (startup year), no relief
Year 3 carry-back: 2022/23 — £60,000 employment income, loss set against this
Tax refund: (£35,000 at 40% higher rate) = £14,000 income tax refund
No NIC refund (loss set against employment income, not trading profits)
Total refund: £14,000

Sources & Methodology

Disclaimer: This calculator provides estimates. Tax refund amounts depend on your exact prior year tax position, other income, and the specific relief claimed. Loss relief rules are complex — particularly for partnerships, early-year losses, and terminal losses. Always consult a qualified accountant before making a claim.

Official Data Source: Calculations use rates from HMRC HS227 Losses | HMRC Income Tax Rates. Always verify with official sources for important financial decisions.

UK Calculator Editorial Team

Our calculators are maintained by qualified accountants and financial analysts. All tools use official HMRC, ONS, and NHS data. Learn more about our team.

Trading Loss Carry Back Calculator