Self Assessment Confusion

Dinah93

Hi everyone.

I've filled in my self assessment tax return for a craft business I ran during maternity leave. I was expecting tax back as I didn't make back anything like what I put into it (£2117.00 outgoings vs £105 income) however it says I owe 80p. My income for my main job for the year from my P60 is £9949.00, on which I paid £368.00 tax. I think the mistake I might have is that in section 4 'Losses for business X' I have no numbers, but I don't know what to put as when I try to do the worksheet it says £0 allowable losses. Is this the problem? Would really appreciate any help anyone can offer even if its just to say its correct.

Dave_the_Ginger_Cat

I don't think you can offset losses for self employment against PAYE income, hence the 0 allowable losses.

I think you can only offset these against other self employment.

For some categories (rental for example) you can carry forward losses to future years, but only offset against earnings from the same category.

So I think it's right

Regshoe

You can claim against other income for self-employment losses - it's called Sideways Loss Relief, subject to the following caveat:

"You should only claim relief for your loss if you ran your trade
commercially for profit. If not, for example, because your trade is run
as a hobby, you can only claim to set the losses against profits made in
your trade"

Dave is correct regarding letting losses - they can only be used against other lettings profits (carried forward or set sideways).

Clearly what is for profit and what is for trade is not clear cut, especially for the first year or so - if it were to be continually unprofitable then I think it would be called into question as to whether it's a serious trade.

Technically you'll waste a small amount of your personal allowance (about £168) by offsetting sideways, but it's probably worth it to get the refund now and not risk not having future trade profits to offset against in future.

Without having the return in front of me it's hard to see where you are going wrong though.