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When a sole trader makes a loss, the trading income assessment (ie the taxable profit for the year) is nil. However the losses for the period can be utilised in various ways against profits. The calculation of losses is generally computed in the same way as profits, see the Adjustment of profits ― overview guidance note.

The loss relief claims that are available depend on whether the trade has started within the last four years, is a continuing trade or the trade has ceased. This guidance note concentrates on claims that can be made for trading losses incurred by ongoing trades (ie trades not in the first four years of trading or in the 12 months to cessation).

For a comparison of the various loss relief claims, see Table ― trading loss relief summary.

The relief for losses in the opening years of a trade is detailed in the Sole trader loss relief ― opening years guidance note and relief for losses on the cessation of the trade is set out in the Sole