Hello,
I am employed and pay taxes through PAYE, and I have to file returns every year through Self Assessment.
I have also registered as a sole trader, have ONLY started trading in 1st May 2020, and have recorded a loss for 2020/21 tax year. I anticipate making a loss for 2021/22 year, and hopefully making an income from 2022/23 and onwards
My question is regarding loss relief. Should I:
1) Carry the loss for 2020/21 tax year to the previous three tax years of employment income, go against the later years first (i.e. starting with 2019/20)
or
2) Set the loss against my total income of the three years immediately before the loss year, starting with the income of the earliest years first (i.e. starting with 2017/18)
Assume that the self-employment loss is smaller than my average yearly income from employment, so I won't claim relief in more than one tax year. (I assume I cannot choose which tax year to set the income against for both scenarios?)
Is there a difference between the two options? My yearly income is approximately the same for all these tax years, so it doesn't make too much of a difference which year I set it off against. Which optionwill give me more flexbility? Am I missing something?
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