Corporation Tax Loss Relief: Carry Back or Carry Forward a UK Trading Loss?

A company trading loss does not automatically produce a tax refund. But where the rules allow, Corporation Tax loss relief can reduce taxable profits in the same period, recover tax relating to earlier profits, or help against future profits.

This guide explains the relief routes. It is not a repeat of our general Corporation Tax optimisation article.

Start with the tax loss, not just the accounts loss

An accounting loss and a tax trading loss may differ. Disallowable expenses, capital allowances and other adjustments can change the amount available for relief. A cash shortage is not proof of a tax loss either.

Before choosing a route, gather final accounts, the tax computation, previous returns and details of any changes in the trade or company ownership. Identify the correct accounting periods and the type of loss: trading, capital and property losses have different rules.

Relief in the loss-making period

A company can generally claim qualifying trading loss relief against other profits of the same accounting period. The available profits and statutory conditions determine the usable amount.

This matters before looking backwards: ordinary carry-back claims generally apply the loss against the loss-period profits first. You cannot simply select whichever past year produces the most attractive headline refund without following the rules.

Ordinary carry-back: the previous 12 months

Qualifying trading losses may normally be carried back against profits in the previous 12 months, provided the relevant conditions are met. The trade must have been carried on in the earlier period. Period lengths and overlapping accounting periods can affect the calculation.

For illustration, suppose a company has a £10,000 qualifying trading loss, no other profits in the loss period and sufficient eligible profits in the previous 12 months. A carry-back claim may reduce those earlier taxable profits by £10,000. Any refund depends on the actual earlier tax calculation, relief already used and the applicable conditions—not a universal refund percentage.

HMRC normally requires a claim within two years of the end of the accounting period in which the loss arose. Check the exact claim deadline and method before relying on that period.

Carry-forward: future profits instead

Unused qualifying losses may be carried forward. The permitted offset and any claim requirements depend on when the losses arose and the applicable rules. Restrictions can matter for larger profits, groups and changes of ownership or trade.

For a small company, the practical question is often whether earlier taxable profits exist and whether future profits are likely. Carry-forward relief is not cash in the bank today.

Terminal relief is different

When a company permanently ceases trading, losses from the final 12 months of the trade may qualify for terminal loss relief against qualifying profits of the previous three years, subject to detailed ordering and period rules.

Do not confuse this with ordinary carry-back. Nor should you reuse the temporary pandemic-era extended carry-back as if every ongoing company still gets three years of relief.

Before making a claim

Confirm the tax-adjusted loss and its category.
Review profits and reliefs in the relevant periods.
Check continuity of trade and any ownership changes.
Compare eligible carry-back with future use.
Submit the claim correctly and retain the calculation.

Loss relief is best reviewed alongside the company return. Enquire about year-end accounts preparation and tax filing; the £300 fixed-fee offer concerns those services, while bookkeeping is quoted separately.

Official guidance

October 2026 edition. Obtain advice on your company’s figures and claim deadlines before acting.