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As a self employed person, you'll have a loss for tax purposes if your deductible expenses are greater than your income. You can use a loss to reduce your taxable income in the next tax year.

How to claim the loss

You can claim a loss when you file an IR3 return the year after you made the loss. We'll then tell you how much of the loss you can carry forward. This is then entered in your IR3 return the next year, unless you have:

  • had an audit or made a voluntary disclosure which changed the amount of loss available
  • used part or all of your loss to pay tax debts or shortfall penalties
  • been declared bankrupt and the loss relates to debts you do not have to pay.

A loss from a previous year is called a loss brought forward. This reduces your income, so it reduces the amount of tax you have to pay. If the loss brought forward is greater than your income, the excess can be carried forward to the next tax year until the loss is fully used.

Student loans

Do not include any loss from a business or investment activity when you work out student loan adjusted net income.

You may have separate business or investment activities which are normally carried out in association with each other. If one of these makes a loss while another makes a profit, you can offset the loss from one activity against similar income from another.

Losses brought forward are not included when you work out total adjusted net income in your IR3 return.