Terminal trade loss relief (UK individuals)
On permanent cessation, a qualifying terminal loss is calculated by reference to losses in the final 12 months of the trade. An individual may claim relief against profits of the same trade in the final tax year and the preceding three tax years, taking the most recent year first. The statutory calculation, conditions and time limits must be checked.
Worked example
A sole trader ceases and has a qualifying terminal loss of £15,000. There are £5,000 eligible profits of the same trade in the final year and £12,000 in the previous year. Assuming all conditions are met, the claim uses £5,000 against the final year and £10,000 against the previous year.
Common mistake
Setting a terminal loss against unrelated income or using the oldest prior trade profits before the most recent.
Where it appears in your exams
| Qualification | Exam | Relationship | Period |
|---|---|---|---|
| ACCA | TX (UK) | Direct | June 2026–June 2027 |