How do trading losses work for sole traders?

How do trading losses work for sole traders? A trading loss is when your business costs exceed its income for the tax year. For 2026-27 you can set it against other income this year or last, carry it forward, or in some cases carry it back further. Yes. From the 2024-25 tax year, cash basis losses can be used in the same ways as losses worked out with traditional accounting, including against other income of the same year or carried back. Before that, cash basis losses could not be set against other income. Yes. Loss relief against other income counts towards a yearly limit of £50,000 or 25% of your adjusted total income, whichever is higher. The limit does not apply when a loss is set against later profits of the same trade. No. A claim must use as much of that year's income as the loss can cover, even if that wastes your personal allowance. Only what is left over can be used another way. Read the full answer, with every source, at rightotax.co.uk.