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1.when is it better to deduct PA instead of trading losses and trading loss instead of PA?
2. We have total income 31000 so we deduct 31000 loss relief. but i could not understand what does this statement means ,” The claim in 2013/14 will also waste the PA but will generate a repayment of tax of 20% on a taxable income of £21,000 (31,000 – 10,000).1)It depends on the situation.Ideally, if it were allowed under the rules, it would be optimal to only use enough of the loss to bring income down to level of the personal allowance.Doing this would reduce tax payable to zero while still preserving the rest loss for future loss relief.However, this is not allowed for so-called sideways relief for trading losses against non-trading income.It is an all or nothing situation in which loss has to be applied to greatest extent possible if claimed for year.In effect this can lead to personal allowance being wasted as relief would be taken on amount below personal allowance- relief against income on which tax would not be payable in first place.
2)Not sure of details of question but the repayment suggests tax had already been paid on twenty one thousand above allowance and so repayment would be due to taxpayer from HMRC if this loss relief were successfully claimed.If tax were already deducted through PAYE this would be the case.
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