In 2018/2019, a client sold their business. They have terminal losses of £45,000 due to overlap profits. They also have a capital gain of £250,000 and pension income of £20,000. The capital gain is subject to entrepreneurs relief.
Should the terminal losses first be set off against:
A) Trading profits from previous years (same trade).
B) Capital gain.
C) Other income in the same year, down to zero, effectively losing their personal allowance.
If they are first used against profits from the same trade in previous years, they will be fully used in 2017/2018 and 2016/2017 combined.