UK Tax - can I claim expenses against a different tax year?

Question

I have a day job but also a small freelance income from after-hours work. It's big enough that I have had to file a tax return for the last couple of years and pay tax on the profits left after my expenses.

The UK tax year runs from April 5th. In mid-May this year I made a substantial purchase (£400) of equipment for my freelance work. A couple of weeks later I was told by my biggest client that their funds for freelance work had been cut, harshly, and they were unable to guarantee me any work this year. So my freelance income has fallen off a cliff and may not recover.

I have some hazy recollection that there is some leeway under when you are allowed to claim for expenses, in order to give self-employed people some protection under these exact circumstances. It would be useful for me to claim my purchase in the previous tax year, when I had more than enough income to cover it. But I do not know and cannot find what the exact rules are.

So: in the UK, am I allowed to claim a large purchase made early in the 2015-2016 tax year under my expenses for the 2014-2015 tax year?

Answer 1

In some circumstances losses from self-employment can be offset against total income and/or capital gains.

If this applies to you may be able to claim back some of the tax taken by PAYE from your day job. You can also to some extent carry the loss backwards into previous tax years or forward into the next one if you can't use it fully this year.

HMRC have some information available on the current rules:

When you can claim losses

You can claim:

• if you spend (on average) at least 10 hours a week working in your business
• if the loss is from your business income

But

You can’t claim:

• if you use cash basis
• where you don’t run your business commercially for profit
• for part of a loss (you must claim the loss in full)
• if you are part of a limited liability partnership
• where your losses are tax-generated