Offsetting tax - sole trader business + PAYE job

CRAIGSVILLE1

Hi all,

I have a full time PAYE salaried job, and have just started a small part time sole trader business, which doesn't make much money at the moment.
If I were to make a profit loss one year from my sole trader business, can I offset the loss on the tax I pay on my PAYE job, and claim the tax back later from HMRC ? 

Thanks

Sandtree

The answer isn't straight forward and it depends on your accounting basis for one.

Jeremy535897

The accounting basis is the fundamental issue. If you use the cash basis, you cannot set trading losses against other income. If you use the accruals basis, you can. In the simplest case, you claim the loss against the same year's other income, but there are many other options available, provided that the trade in question is carried on with a view to profit.

When completing a self assessment tax return, as you are required to do if you are self employed and your turnover exceeds £1,000, you make the relevant loss relief claim and complete your bank account details in the relevant section.

You also need to make a note of any trading losses for future class 4 NIC liabilities.

CRAIGSVILLE1

Jeremy535897 said:

The accounting basis is the fundamental issue. If you use the cash basis, you cannot set trading losses against other income. If you use the accruals basis, you can. In the simplest case, you claim the loss against the same year's other income, but there are many other options available, provided that the trade in question is carried on with a view to profit.

When completing a self assessment tax return, as you are required to do if you are self employed and your turnover exceeds £1,000, you make the relevant loss relief claim and complete your bank account details in the relevant section.

You also need to make a note of any trading losses for future class 4 NIC liabilities.

Thanks for that.
I don't intend to make a loss, but if i buy a car/van one year for the business, it might drop into a loss that year.
I will try and find a tax accountant / bookkeeper to advise me I think

Jeremy535897

Note that if you use the cash basis, a van is treated as an expense, but a car is still subject to the capital allowances regime.

Savvy_Sue

Jeremy535897 said:

Note that if you use the cash basis, a van is treated as an expense, but a car is still subject to the capital allowances regime.

It's comments like that which hopefully help people realise the value of an accountant, who understands YOUR business, YOUR set up, YOUR way of doing things, and can recommend the BEST way of doing things in YOUR situation. I am not an accountant, so I have no clue about this stuff!