Contractors’ Questions: How to show a loss on my tax return?
Contractor’s Question: It has been my first year as a freelance contractor and I made no profit. My tax return is due on the 31st of this month. Do I need an accountant to help me with the return, and reflect the loss, or should I be able to fill in the online form by myself?
Expert’s Answer: You may well be able to fill in the online form without an accountant's help. Simply put in your total business income and costs for the tax year to April 5th 2011 when you're directed to by the online form. Then, if your costs exceed your income, it'll note that you've made a loss.
However, I recommend you still refer to an accountant. This is because if you've made a loss as a freelancer then you might well be able to claim a tax refund (from Her Majesty’s Revenue & Customs) if you've been employed within the past three years, or if you have other income. This will depend on your own unique personal circumstances, which is why I recommend you speak to an accountant directly. Treatment of losses can be complicated and it's too easy to miss out on tax refunds altogether, or to postpone them unnecessarily!
The expert was Emily Coltman, chief accountant at Free Agent, an accountancy provider for contractors.