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When a sole trader or partnership makes a loss, the trading income assessment (ie 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 for sole traders depends on whether the trade has started within the last four years, is a continuing trade or whether the trade has ceased. This guidance note concentrates on claims that can be made for trading losses arising in the first four years of the trade. For a comparison of the various loss relief claims, see the Table ― trading loss relief summary.

The relief for losses in established trades is detailed in the Sole trader losses ― established trades guidance note and relief for losses on the cessation of the trade is set out in the Sole trader losses on cessation guidance note. The treatment of partnership