No. A trading loss made by a limited company belongs to the company and can only be set against the company’s own profits or, through group relief, the profits of other companies in its group. It cannot be passed to a director or shareholder. Personal relief comes only by indirect routes, mainly share loss relief when the shares you subscribed for become worthless, capital loss relief on money you lent or guaranteed, and income tax relief on interest you pay to fund the company.

Why can’t the company’s loss go against my own income?

Because the company, not you, carries on the trade. The corporation tax loss reliefs are written for the company. Section 37 of the Corporation Tax Act 2010 (CTA 2010) gives relief by deducting a trading loss from the company’s total profits of the loss making period and, on a claim, the previous 12 months. Section 45A carries an unused loss made in a period beginning on or after 1 April 2017 forward against the company’s total profits of later periods. Section 99 lets a company surrender losses under the group relief rules in Part 5, which pass them to other companies. None of these reaches an individual.

A sole trader is in a different position. Section 64 of the Income Tax Act 2007 (ITA 2007) lets a person who carries on a trade and makes a loss claim to deduct it from net income of the same or previous tax year, which is why losses in an unincorporated business can shelter salary or other income. That choice disappears on incorporation; see sole trader or limited company and trading losses against other income.

What happens to the loss inside the company?

The company can use it against other income and gains of the same period, carry it back 12 months, or carry it forward. A section 37 claim must be made within two years after the end of the loss making period, and a section 45A carry forward claim within two years after the end of the later period, unless HMRC allows longer. If the company is in a group, the loss may be surrendered to a profitable fellow subsidiary. The detail is in company trading losses and group relief.

If the company never returns to profit, the losses stay with it and give no relief to anyone. That is why the personal routes below are worth understanding before money goes into a company, not after it has failed.

When can a failed company give me income tax relief?

The main route is share loss relief in Chapter 6 of Part 4 of ITA 2007. Section 131 makes an individual eligible if they incur an allowable capital loss on the disposal of qualifying shares. Shares qualify if EIS relief is attributable to them, or if they are shares in a qualifying trading company that the individual subscribed for. Shares bought from another shareholder do not qualify unless EIS relief is attributable.

The disposal must be one of four kinds listed in section 131(3): an arm’s length sale, a distribution in a winding up or dissolution, the entire loss or extinction of the shares under section 24(1) of the Taxation of Chargeable Gains Act 1992 (TCGA 1992), or a deemed disposal under a negligible value claim in section 24(2). A company that has failed but not yet been dissolved is usually dealt with by a negligible value claim.

Under section 132 the loss can be deducted from net income of the tax year of the loss, the previous tax year, or both, and the claim must be made on or before the first anniversary of the normal Self Assessment filing date for the year of the loss. Our page on share loss relief goes through the conditions in full.

What is a qualifying trading company?

Section 134 ITA 2007 sets three conditions for shares without EIS relief. In outline, on the date of disposal the company must meet the trading, control and independence, qualifying subsidiaries and property managing subsidiaries requirements, or have stopped meeting them not more than three years earlier without becoming an investment company or excluded company since. It must have met those requirements for six years, or for a shorter continuous period with no earlier spell as an investment, excluded or trading company. It must also have met the gross assets requirement around the share issue and the unquoted status requirement.

Is the relief capped?

Often. Section 24A ITA 2007 limits certain income tax reliefs, including share loss relief, to the greater of £50,000 and 25% of adjusted total income for the year. The cap does not apply to share loss relief on shares with EIS or SEIS relief attributable. Any loss that cannot be relieved against income remains a capital loss.

How does a negligible value claim work?

Section 24(2) TCGA 1992 treats the owner as selling and immediately reacquiring the shares for the value stated in the claim, usually nil. The claim can specify an earlier time if the shares were already of negligible value then and, for Capital Gains Tax, the earlier time is not more than two years before the start of the tax year in which the claim is made. That allows a loss to be placed in a year where it gives most relief. See negligible value claims.

What about money I lent to the company or guaranteed?

Loans are treated differently from shares. Section 253 TCGA 1992 allows a claim where a qualifying loan has become irrecoverable: broadly, money lent to a borrower who used it wholly for a trade, where the debt is not a debt on a security. The irrecoverable amount is treated as an allowable capital loss. Under section 253(4), if you paid under a guarantee of such a loan, for example a personal guarantee of the company’s bank borrowing, the payment can also be treated as a capital loss, with a claim due within four years after the end of the tax year in which you paid.

These are capital losses only. They reduce capital gains, not salary or other income. See losses on loans to traders.

Can I get relief for interest on money borrowed to fund the company?

Yes, in some cases. Section 383 ITA 2007 gives relief for interest on certain loans, and section 392 covers a loan used to buy ordinary shares in, or lend money to, a close company that is not a close investment holding company, where the money is used wholly and exclusively for the company’s business. The interest is deducted in calculating net income for the tax year in which it is paid. It counts towards the section 24A cap. See qualifying loan interest relief.

What does this look like when a company fails?

Illustration only. A founder subscribed £40,000 for new shares in her trading company and later lent it £15,000. The company stops trading in 2026 to 2027 with £60,000 of unused trading losses and no assets.

  • The £60,000 of company losses stay with the company and are lost when it is dissolved.
  • If the company meets the qualifying trading company conditions, a negligible value claim on the shares can create a £40,000 loss that she claims against her income for 2026 to 2027, 2025 to 2026, or both. At £40,000 it is within the £50,000 floor of the cap.
  • The £15,000 loan, if irrecoverable, gives a capital loss under section 253 that can only be set against capital gains.

Had she put all £55,000 in as share capital, more of it could have qualified for income relief. The form of the investment decides the relief.

What mistakes come up?

  • Expecting the company’s losses to be claimed on the director’s Self Assessment return.
  • Assuming shares bought from another shareholder qualify for share loss relief, when only subscribed shares do unless EIS relief is attributable.
  • Missing the share loss relief deadline, which runs from the normal filing date for the year of the loss.
  • Treating a loan to the company as if it could be relieved against income.
  • Forgetting the section 24A cap when the loss is large compared with income.

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Reviewed by Christine Anderson, Broker, Solar Protect. Last reviewed 19 October 2026. Part of Accountapedia, the Solar Protect guide to UK tax and accounting. This page is general information, not personalised advice.