Key takeaways
- A trading loss can be set against the company's other profits of the same period, then carried back 12 months against total profits.
- Unused losses are carried forward without time limit and, for losses since April 2017, can be set against total profits.
- Large carried-forward losses are restricted: only 50% of profits above a £5 million deductions allowance can be relieved.
- When a trade ceases, losses of the final 12 months can be carried back three years.
- Losses can be surrendered to other companies in a 75% group through group relief.
When a company’s allowable expenses and capital allowances exceed its income, it has a trading loss for Corporation Tax. The loss itself is not refunded, but it can reduce tax on other profits now, in the past or in the future. Choosing the right order can produce a cash repayment when the business needs it most.
The options for a trading loss
| Relief | Against | Timing | Claim |
|---|---|---|---|
| Current period | Total profits of the same accounting period (interest, gains, property income) | Same period | Claim within 2 years |
| Carry back | Total profits of the previous 12 months | Previous period(s) | Only after current-period relief; claim within 2 years |
| Carry forward | Total profits of later periods (post-April 2017 losses), subject to restriction | Future periods | Automatic or by claim, depending on the type |
| Group relief | Profits of other companies in a 75% group | Overlapping periods | Surrender and claim on the returns |
| Terminal loss | Profits of the previous 3 years | When the trade ceases | Claim within 2 years |
Carrying back
A company can carry a trading loss back against total profits of the 12 months before the loss-making period, but only after setting it against profits of the loss-making period itself. A carry back often produces a repayment of Corporation Tax already paid, which can be valuable for cash flow.
Example
A company’s results:
| Year to 31 March | Trading result | Other income |
|---|---|---|
| 2026 | Profit £80,000 | £0 |
| 2027 | Loss £(100,000) | Interest £5,000 |
The company can set £5,000 of the loss against its 2027 interest, then carry back £80,000 to the year to March 2026, reclaiming the Corporation Tax paid on those profits. The remaining £15,000 is carried forward.
Carrying forward
Losses incurred from 1 April 2017 that are carried forward can be set against the company’s total profits of later periods, not just profits of the same trade, as long as the trade continues and is not of negligible size. Older losses can only be set against profits of the same trade.
The loss restriction
Companies can relieve carried-forward losses in full against profits up to a £5 million deductions allowance each year (shared across a group). Above that, only 50% of the remaining profits can be covered by brought-forward losses. Most small and medium-sized companies are not affected.
Terminal losses
When a company ceases to trade, a loss made in its final 12 months can be carried back against profits of the previous three years, latest first. This can produce repayments of tax paid in earlier, profitable years.
Group relief
Members of a group where one company owns at least 75% of another (directly or indirectly) can surrender current-period losses to other members with profits in the same period. Losses carried forward since April 2017 can also be surrendered in some cases. See group relief.
Other types of loss
- Property business losses are set against total profits of the same period, then carried forward.
- Capital losses can only be set against chargeable gains, now or in future, not trading profits.
- Non-trading loan relationship deficits (for example interest on borrowing for investments) have their own rules for offset, carry back and carry forward.
Anti-avoidance
Carried-forward losses can be lost if there is a change in ownership of the company combined with a major change in the nature or conduct of its trade within a set period. Buying a company mainly for its losses rarely works.
Getting the claims right
- Claims for current-period and carry-back relief are made on the CT600 for the loss-making period (or by amending earlier returns) within two years of the end of the loss-making period.
- Consider the rate: relief at 25% on future profits may be worth more than relief at 19% on past profits, but a repayment now may matter more to cash flow.
- Make sure capital allowances are claimed in the way that gives the best loss position; claiming less in a loss year can preserve allowances for later.
Frequently asked questions
Can a company carry back a trading loss?
Yes, against total profits of the previous 12 months, after first using it against profits of the loss-making period. Terminal losses can go back three years.
How long can a company carry forward losses?
Indefinitely, while the company continues to trade. Losses from April 2017 can be set against total profits, subject to the £5 million allowance and 50% restriction.
Can losses be transferred to another company?
Yes, to other companies in a 75% group through group relief, and to consortium members in some cases.
What is the time limit to claim carry back?
Two years from the end of the accounting period in which the loss was made.
Sources
Rates, thresholds and rules in this guide were checked against HMRC and GOV.UK guidance in October 2026. Tax rules change, so check the current position on GOV.UK or with a qualified adviser before acting. This guide is general information, not personal advice.