Corporation tax loss relief UK – How to claim and use losses

4 September 2026

This guide explains how to use corporation tax loss relief UK when your limited company makes a loss. It covers the main routes to relief, practical steps to make claims, common traps for small companies, and examples to help you choose the best option.

What is corporation tax loss relief and why it matters

When your company makes a trading loss HMRC allows you to use that loss to reduce tax liabilities in other periods or for other companies in the same group. The main commercial benefits are improved cash flow and reduced future tax bills – both vital for early stage businesses, seasonal traders and companies investing heavily in growth.

The main types of relief we will cover are:

carry forward losses – set losses against future profits
carry back losses – set losses against profits of earlier accounting periods
trade loss relief and terminal loss relief – special rules for trading activity
group relief UK – surrendering losses between connected companies

Throughout this article the primary keyword corporation tax loss relief UK appears naturally to help you find the right information and take the next steps.

Types of losses and how they are treated

Trading losses

A trading loss arises when allowable business expenses and deductible items exceed trading income in an accounting period. Trading losses are generally the most flexible: they can be carried forward against future profits of the same trade, sometimes carried back to earlier periods, or surrendered to group companies in the same period.

Non-trade revenue losses

These include losses from investments, rental income or other non-trading activities. Non-trade losses cannot be treated the same as trading losses and have narrower options for relief. For example, investment losses usually cannot be surrendered as trade loss relief.

Capital losses

Losses on the disposal of capital assets are treated separately and can only be offset against capital gains, not trading income. Keep capital and revenue losses clearly separated in your statutory accounts.

Carry forward losses – the default route

For many small companies the most common route is to carry forward losses and set them against future profits of the same trade. Key points to understand:

Carried forward trading losses are normally available to offset taxable profits of the same trade in later accounting periods.
The losses must be calculated properly in your statutory accounts and tax computations before they are available for tax relief.
There are special restrictions for companies with large profits and groups – but most small businesses under the thresholds are unaffected.

Practical tips for carry forward losses:

Ensure losses are supported by your statutory accounts and the tax computations prepared for the Company Tax Return (CT600).
Keep clear records showing how the loss was calculated – HMRC will want to see supporting documents if challenged.
If your company changes trade or there is a loss of continuity in ownership, the ability to use carried forward losses may be limited – get specialist help early.

Carry back losses – get a refund sooner

If you need cash quickly, carrying a trading loss back against earlier profits can trigger a tax repayment. The basic idea is:

A trading loss may be carried back to the previous accounting period to reduce earlier taxable profits, producing a refund of corporation tax already paid.
Some special rules allow longer carry back periods for terminal losses when a company stops trading.

How to claim

Make the claim on your Company Tax Return (CT600) for the period in which the loss occurred, or follow the process set out by HMRC for amending earlier returns where appropriate.
Claims must be made within statutory deadlines, so act promptly once you prepare your accounts.

Example

If your company made a £50,000 trading loss in the year to 31 March 2026 and paid tax on profits in the year to 31 March 2025, you may be able to carry back the loss and reclaim corporation tax paid in 2025.

For detailed HMRC guidance see the GOV.UK page on trading losses – it explains which claims to make and where to put them on the CT600: https://www.gov.uk/guidance/corporation-tax-trading-losses-relief

Trade loss relief and terminal loss relief explained

Trade loss relief covers trading losses made while your company is carrying on a trade. There are extra options if the company ceases trading:

Terminal loss relief applies when a company’s trading activities stop. Losses in the final 12 months of trade can typically be carried back against profits of the previous three years. This can be very useful when winding down a business.
Trade loss relief rules distinguish between losses arising from the same trade and those from different activities. Only losses from the same trade are usually allowed to be offset against prior profits of that trade.

If you are thinking about closing a company or you have stopped trading, speak to an accountant quickly – terminal loss claims can be time sensitive and need careful calculation.

Group relief UK – share losses inside a corporate group

If your company is part of a group, group relief can let profitable group members use losses from loss-making members in the same accounting period. Key features:

Group relief UK allows the surrender of current year trading losses to other group companies that are liable to UK corporation tax.
Companies are typically grouped if one company owns at least 75% of another’s ordinary share capital, or through a chain of qualifying relationships. The 75% ownership test is the common control requirement.
Losses can only be surrendered for the same accounting period and must be genuinely available after statutory adjustments.

Practical steps for group relief:

Agree the surrender amount between companies in the group and reflect it properly in the tax computations.
Ensure all group members have compatible accounting period ends or make the necessary elections so losses line up.
Keep formal minutes or written records of loss surrender agreements – HMRC will expect clear documentary evidence.

Group relief is a powerful tool when you have both profit and loss companies in a group. For complex group structures speak to a tax adviser to make sure you meet the qualifying tests.

Choosing the best relief – questions to ask

When a loss arises, consider these factors to choose the best route:

Do you need cash now, or are you confident of future profits? If you need cash, consider carry back or group relief where available.
Will the company continue trading? If you expect profits later, carry forward losses may be most valuable.
Is the company part of a larger group with profitable companies? Group relief UK could unlock immediate tax value.
Are there ownership or trade continuity changes planned? Changes may restrict the use of carried forward losses.
Are losses revenue or capital in nature? Capital losses cannot be offset against trading profits.

A worked example

Scenario A: A growing software company makes a £120,000 loss in year 1 and expects to be profitable from year 2. It likely benefits most from carry forward losses, offsetting future trading profits and reducing tax bills as profits arise.

Scenario B: A trading company closes in year 3 with significant losses recorded in the last 12 months. Terminal loss relief may allow it to carry those losses back against the previous three years of profits, producing a tax repayment sooner.

Scenario C: A small group of companies includes a profitable trading company and a loss-making R&D company. Group relief may be used to surrender current year trading losses to the profitable company, reducing the group’s immediate corporation tax bill.

Practical steps to claim loss relief – a checklist

Reconcile your bookkeeping and statutory accounts so the loss is correctly shown. Consider using cloud accounting and good processes – see our Bookkeeping & Xero service for help.
Identify the type of loss – trading, non-trading revenue or capital loss.
Decide which relief gives the best cash or tax advantage – carry forward, carry back, terminal relief or group relief UK.
Prepare accurate tax computations and complete the Company Tax Return (CT600). Claims are usually made on the CT600 for the period in which the loss arises.
Keep documentary evidence and board minutes if losses are surrendered within a group.
Monitor time limits and make claims promptly. If you miss a deadline there may still be options, but professional help is essential.

If you need help getting your accounts and tax computations ready, a proper year-end process makes claiming relief much smoother. Our Statutory Accounts & Tax service helps companies prepare the figures HMRC expects.

Record keeping and audit risk

HMRC will expect clear records to support loss claims. Maintain:

Full accounting records and supporting invoices
Board minutes for any decisions to surrender losses in a group
Detailed tax computations showing how losses have been arrived at
Evidence of any elections made and relevant dates

Poor documentation increases the risk of an enquiry and can delay any repayment from HMRC.

Common pitfalls and how to avoid them

Confusing revenue and capital losses. Only set capital losses against capital gains.
Misunderstanding ownership tests for group relief UK. Confirm shareholdings meet the qualifying threshold.
Ignoring time limits for claims and amendments. File the CT600 properly and on time.
Failing to consider restriction rules for large groups. Companies with profits above the allowance may face restriction when using carried forward losses.
Not factoring in the effect of loss relief on other taxes and reliefs. For example, relief claims may change your eligibility for certain reliefs or allowances.

When to involve a specialist – practical triggers

Engage a tax adviser when:

Loss values are material to the business and you want to optimise tax cashflow.
The company is part of a group and you are considering group relief UK.
You are closing the business and need terminal loss relief to maximise repayment.
There is a change of ownership or a potential change of trade.

If you want an expert to review the options and handle CT600 claims, our Fractional CFO and tax teams can help structure claims and manage HMRC engagement. We can also help with forecasting the tax impact of different choices via Cash Flow Management.

Frequently asked questions

Q: What is the difference between carrying losses forward and carrying losses back?

A: Carrying losses forward sets them against future profits of the same trade, reducing future tax bills. Carrying losses back offsets earlier profits, which can generate a corporation tax refund if tax was paid in earlier periods.

Q: Can I surrender losses to another company in my group?

A: Yes. Group relief allows the surrender of current year trading losses to other companies in the same group that meet the ownership and qualifying conditions. This is commonly used when profitable and loss-making companies sit under the same group structure.

Q: How long do I have to claim loss relief?

A: Claims should normally be made on the Company Tax Return for the relevant accounting period. There are statutory time limits and amendment windows, so you should prepare and submit claims promptly. If in doubt, consult HMRC guidance or a qualified accountant.

Q: Are carried forward losses restricted for larger companies?

A: There are rules that restrict the use of carried forward losses for companies and groups above certain thresholds. Most small businesses fall below those thresholds, but if your business is growing fast get specialist advice to understand any limits.

Q: What records should I keep to support a loss claim?

A: Keep complete accounting records, tax computations, invoices, bank statements, and minutes for any group decisions to surrender losses. Good records speed up claims and reduce the risk of HMRC disputes.

UK tax and legal accuracy

This article is for informational purposes only and does not constitute professional tax or financial advice. Please speak to a qualified accountant before taking action. Relevant tax year: 2026/27.

Summary and next steps

When your company makes a loss there are several routes to recover tax value – carry forward losses for future profit relief, carry back losses for refunds, use trade loss relief and terminal loss relief where appropriate, or use group relief UK to transfer relief inside a corporate group. The right choice depends on your cashflow needs, future profit outlook and group structure.

If you would like help calculating losses, preparing the CT600 and choosing the best relief for your company, speak to Figures. We can help with bookkeeping accuracy, statutory accounts and tax computations via our Bookkeeping & Xero and Statutory Accounts & Tax services, and support cashflow planning through Cash Flow Management. Book a call with our team to review your options and make claims correctly.