Tax efficient use of business losses on closure

[bluemeanies]

Hello, I am closing down an unincorporated small self-employed business with losses in the tens of thousands. I would greatly appreciate some advice on how I can use these losses to minimise my tax bill. I appreciate I may need to pay for specialist advice, but I would like to understand what my options are first so that I know what to ask.

- The business has losses of several tens of thousands of pounds, mostly incurred in 2021/22 and 2022/23. It has never made a profit.
- My other income is around double the personal allowance.
- In the tax year 2026/27 I shall be able to access a personal pension whose taxable portion (the 75% left over after the 25% tax-free lump sum) is a bit larger than the losses. I fully intend to withdraw this pension over as few tax years as possible, starting as soon as possible.

I want to avoid wasting offsetting my business' losses against the £12k personal allowances each tax year. I have no substantial income in any recently preceding tax years, and I won't have in the next several, except for my intended pension withdrawal.

In an ideal world, I would just choose to offset these losses against the 2026/27 tax year. They would offset most of my taxable pension withdrawal and leave me in the 20% income tax bracket. This is what I would have done if I wasn't closing the business.

Because I do intend to close the business, I have done a bit of web research and it looks like I will have to do something with the losses in the tax year that I cease trading - I can't simply carry them forward to 2026/27 as the business will not longer exist? I have read about sideways loss relief and terminal loss relief, neither of which offer me much tax benefit - perhaps half the losses would be wasted offsetting my personal allowance each year.

A) So, do I have to use up the losses in any available sideways loss relief and terminal loss relief in the tax year I cease trading?

B) Or can I opt to take neither sideways loss relief nor terminal loss relief, thereby having an income tax loss?

C) If I can do the above, does the income tax loss have to be offset against my other income in this and subsequent tax years, or can I carry it forward to a year of my choosing (2026/27)?

D) If the above answers leave me using up my losses partly against several year's £12k personal allowance, can I delay the closing of the business until 2026/27 when I expect this pension income? It would not be viable to continue the business in its current form - it's a lot of time and a lot of losses each year.

Thank you in advance for any advice.

[wamstax]

Trading losses need to be used in the year of cessation or carried back as terminal loss relief. Any remainder is lost.
I also assume that you will not fall foul of the uncommercial losses provisions ( 5 years losses) given that you say the business never made a profit.