Making a loss in your first year

Rachy Roo

Well-Known Member
Im really confused now. Will be ringing business link/inland revenue tomorrow when i get a minute but wondered if any of you know.

I made a loss of almost £2,500 in my first year. Bad I know but this year it has really picked up so if I carry on at the same rate I will break even next year.

Anyway this -£2,500 does it carry over into next years accounts, I thought it would but my mum (who is also self employed) says it doesn't and your accounts start at 0 each year.

I would have thought that would be the case if you had already broke even and into profit but surely you can't just cancel out the loss??

Any help would be great!! xx


Brush Slayer Geek
I made a loss in my first year, actually I made a slight loss in my second too :lol:

I'm not sure how to answer your question really - I'll explain what happened with me and I hope that will answer your questions?

I spent my 'own' money setting everything up so I didn't owe anyone any money as such. If you have accounts outstanding with suppliers then they will need to be paid, but if you spent your own money then obviously you don't have to pay yourself back.

My accounts were 'closed' at the end of the year for tax purposes - my accountant worked out my tax return (or loss) and filed my details with the tax office. My next year then started at zero, so from that perspective your Mum is right.

Not sure if that helps

Rachy Roo

Well-Known Member
thanx for that. i kinda understand, im the same as you - my own money etc. i have booked onto a book-keeping and accounts course on 19th june, just didn't want to turn up a complete dim wit! x


Active Member
Although your accounts start at zero, your bank balance doesn't so if you have an overdraft or owe money it carries on into your next year, that will be reflected in next year's accounts.

Glad to hear that you are doing better this year. Most businesses make a loss in their first year, it takes time to make a profit.

:confused:I have been in business 1 year at July 3rd, and yes, i also have made a loss, but things are gradually picking up. I like a few others used my own money to set up, so did not owe the bank or anyone else any money at all - PHEW!! The initial set up in your first year is going to be expensive, but then things can only get better as you are only need to replace stock items that you need (obviously), so hopefully we will all see our bank balances looking alot healthier this year - GOOD LUCK to everyone one out there who is a newbie business owner. Keep smiling and helping everyone to look as beautiful as they possibly can - we deserve it! Onwards & Upwards xx :lol:

I'm pretty much in the same boat as yourself.
I filled in my 1st tax return last year (although I had only been self emp for part of that tax yr). I remember that at the end of the tax return I ticked a box to say I could carry over the loss I had made.

So I presumed that because I ticked that box I would start this years accounts with a minus figure.

This year I recieved a much shorter/ condensed tax return form ( I presume this is due to the fact I didnt earn a huge amout and I dont have sares and the like). I plan on calling the inland revenue to confirm that I am ok to carry over the loss.

For tax purposes and if you have no other income, your trading loss will be carried over and set off against next years profits. If your profits for that year are not sufficient to use up all the loss, then the balance is carried over again to the next year.

for example

06/07 loss 2,500

07/08 profit 1,000 set £1000 of loss bfwd against profit making trading profit = nil

08/09 profit 1,700 set £1500 of loss bfwd against profit making trading profit = £200. This £200 is then the taxable amount for the year (less any tax allowances)

When you fill out next years return just make sure that you fill in the loss bfwd box. The instructions will be in the guide which comes with the return.


You can set the loss off against previous years income, if thats more beneficial, rather than against future income. If you set it off against next years, you set it against the profit, no matter how much - so you can end up not getting any tax advantage from it. If you paid tax in a previous year, then you will be guaranteed to get the tax back.

Also - if you have made a loss, and you have capital allowances to claim against capital purchases - it is worth not claiming them until you make a profit. You will lose the advantage of getting first year allowances, but at least they are getting offset against income that will be taxed rather than income that will have no tax levied.

I understand this may sound confusing - let me know if I can help more, but be advised that it might be best to get an accountant to help you with your tax return.