Loss is the term used when business income is less than business expenses.

Many businesses make a loss in the first year of trading due to a number of factors.

Any start up costs and pre trade expenses are added to the first year of trading. This can date back up to 6 years for sole-traders.

This might include, marketing, stationary, tools, equipment, machinery, textiles, materials and more.

When a business starts it will likely already be at a loss.

HMRC advises to register self employed when more than £1,000 have earned.

However, registration can be done at any point and any loss carried forward, backward or offset against other taxable income.

Submitting a loss has its advantages.

  • Reduce tax to pay from other income
  • Reduce future tax payable on business income
  • Can be carried back to offset against previous tax years
  • Reports that the business is officially open for business, and a UTR is issued.

It might seem strange when a loss is made, but ensuring to record all expenses, will mean only tax due is paid and no more.

It takes time to grow a business. It doesn’t happen over night.

Nobody sets out to make a loss but everyone should understand it is part of the process.

Having a strategic business plan will help ensure that any losses during business operations are budgeted for.

A good bookkeeper or accountant can help business owners plan and prepare for every eventuality.


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