Q. I am self-employed and receive a small pension. My accounts show that for the tax year 2021/22 I have a self-employment profit of £6,538 and a pension received of £9,305, giving a total income of £15,843. I have available losses brought forward from the previous year of £4,127. Do I need to utilize whole loss in this year against the profit from self-employment, or can I use only £3,273 to bring my taxable profit to nil (the rest would be covered by the personal allowance of £12,570)? Can I carry forward the remaining loss of £854 to the next year?
A: Such losses must be set off against the first year in which a profit arises and any balance in the next tax year. Therefore, the loss must be used as far as possible in 21/22 (i.e., £4,127) leaving no losses available to be carried forward, even if the result is that personal allowances are wasted.