On 3 March 2021, the UK Government announced a temporary extension to the trade loss relief rules for companies and individuals alike. This gives rise to allowing a claim to offset trading losses for the year 2020-2021, as loss relief, against trade incomes of 2019/2020, 2018/2019, and 2017/2018, conditional on a cap of £2 million. If you own a business and wish to benefit from this, our tax accountant in the UK can help you. We recommend talking to us so we can help.
As most businesses suffered due to the COVID-19 pandemic, this was a good time to offer businesses a chance to maximise loss claims. The new rules allow businesses that have their accounting period ending between 1 April 2020 and 31 March 2022 to claim carry back trading losses. The extension allows claiming for the previous three years. This means that sole traders can claim relief on carry-back trading losses for the tax year 2020/2021 and 2021/2022. The proposed extension would build on the existing trade loss relief against the general income. All other current losses would remain as they are.
As the HMRC has not enacted the legislation, we cannot process the claims yet. However, our tax accountant in UK can help you plan.
Planning Tips for Partner Traders & Self-Employed
At Tax Advisor UK, we always aim to minimize your losses and maximise refunds and savings. You need to consider many things to minimize losses. Our tax accountant in the UK ensures that we maximise your refunds. To ensure this, we use your losses against the income taxed at 45%, income taxed at 40%, and income taxed at 20%.
If we set your loss against other income, like your dividend, we can help you save tax at a higher rate. We maximise the income tax claim and maximise the claim for National Insurance refund where it is relevant. Our tax accountant would also consider personal allowances. If your personal allowances already cover income, there will be no need to set loss against it because this will not help save your tax. Sometimes, depending on certain circumstances, we can restore your personal allowance, if there was a higher income the year before.
Planning Tips for Companies
You must keep in mind that corporation taxes are going to increase from 19% to 25% by 2023. There will be a new Small Profits Rate of 19% for companies that have annual profits of about £50,000 or perhaps less. Moreover, companies that make a profit of about £50,000 and £250,000 will pay a tax of 25%. There is more to this and our tax accountant in the UK can inform you about the details.
To sum it up, companies that would have to pay the new 25% rate and that can use the extended loss carry back option, should consider the benefits of claiming the tax refund at 19%, or if they would prefer to carry the losses forward so they can claim relief at 25%. The best alternative would depend on your cash flow and business status right now.
We Can Help
Let us help your sort things out and let our tax accountant in the UK offer the best professional advice. Get in touch with us.
