Suppose an individual has Self employed income of £15,000 and a Partnership loss of £9,000 for 2012/13.
I know that the Partnership loss can be set against the Self employed income but can I allocate just £6,895 of the loss against the 2012/13 Self employed income and then carry forward the remaining £2,105 loss to set against future partnership profits. Or do I have to allocate the whole of the Partnership loss and lose part of the Personal Allowance?
Thank you
Replies (7)
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Waive capital allowances + other options
Agreed personal allowances get lost with the quoted figures by same year set-off claim.
One option is to reduce capital allowances in one or both businesses to increase the profit in the sole trader and reduce losses in the partnership. Then some (maybe even all) of the otherwise lost Personal Allowance can be retrieved.
In a close family members partnership (eg. father and son, wife and husbanD0 the allocation (share of profits) can be adjusted by mutual agreement - sometimes this helps.
In some cases losses can instead be carried back against earlier years' profits / income - another option worth investigating. Particularly relevant to fairly new businesses but also relevant to established businesses in some instances.
Class 4 NIC
It used to be the case, I expect still is the case, that loss relief can be looked at separately for Class 4 NIC from Income Tax.
So losses for Income Tax might be carried back, current year set-off or carried forward, whilst Class 4 NIC losses can be dealt with in a different way. This is a further factor to consider.
All or nothing
Losses are claimed in full in one way or another.
Yiou can't say "I want to claim £ x of my losses in this way and £ y in another way".
See HMRC helpsheet HS227 for further guidance.