Introduction to this document

Flow chart - income tax trading loss relief

Where a business makes a loss from its trading activities, the business owners may be entitled to claim tax relief. This is given by allowing the individual to reduce the amount of income on which they are otherwise required to pay income tax by the amount of the loss. Rules prevent and limit the tax relief in some circumstances.

Flow chart

The Flow Chart - Income Tax Trading Loss Relief will help you decide if and how you can claim tax relief for a trading loss made by your business.

Definitions for the flow chart:

  • Trading loss - a loss made by a trading business and calculated using tax rules rather than accounting rules
  • Trading - statute only says that the term “trade” includes any venture in the nature of trade; this actually has a very wide scope and can include an isolated transaction or a speculative adventure which is intended to produce a profit. Trade takes its ordinary dictionary sense, i.e. operations of a commercial character by which a trader provides some kind of goods and/or services to customers for reward. 


You may find our Share Loss Relief Claim and Unincorporated Business Trading Loss Relief Claim useful when considering a claim for trading loss relief: