Are the rules for offsetting Class 4 NIC trading losses the same as for Income tax losses or is it possible to offset only the amount of losses to reduce the class 4 liability in the profit making business to nil.
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Yes
It is possible to offset losses in one business against profits in another before calculating class 4 NI (if that's what you're asking). In the early days some software did have a problem with the concept but it should now cope easily.
Class IV losses
You can't restrict the offset of the class 4 loss down to the amount of the NIC threshold and carry forward the surplus to the next year in the same way that you do with say a capital loss b/fwd in a CGT comp.
Yes, but where you have say sideways relieved trading losses against say rental income, the class IV loss has not been used so is available for carry forward.
Class 4 Loss
What on earth is a Class 4 Loss? Class 4 only applies to profits when profits pre personal allowance exceeds the threshold. How do you create a Class 4 loss?
Ooops!
What on earth is a Class 4 Loss? Class 4 only applies to profits when profits pre personal allowance exceeds the threshold. How do you create a Class 4 loss?
It's the same (in principle) as an income tax loss.
A lot of people don't realize you can use trading losses against Class 4 NIC in the same way as you can for income tax.
You learn something every day ................
In brief
Anyway - to summarise, the loss relief rules are pretty much analogous to Income Tax rules but, obviously, you only claim against trading income.
Which means that you may well claim Class 4 loss relief in a completely different year to Income Tax relief. A typical scenario is a trader starting up midway through a tax year, claims Income Tax loss sideways against his PAYE income of the job he's just left but carries forward his Class 4 loss to be relieved against future profits.
Just an example. Other scenarios are available.
Thanks to the OP for asking this. I did return on Friday (sole trader t/o <£79k) with significant partnership losses for 2013/14 and was going to email it out on Monday for approval.
The tax calculation summary showed the loss being allowed for tax but the OP's question made me double check what figure the Class 4 had been calculated on. As it turns out, the wrong one! Apparently you can can't get the figure correct for Class 4 if you use the Self Employment Short Pages- has to be the full version.