Test your understanding: answers
(1). Nora’s first tax year of trading is 2024/25, the tax year in which she began to trade.
| Taxable trading income | £ |
|---|---|
| 2024/25 (1 September 2024 – 5 April 2025) (7/12 x £39,240) | 22,890 |
(2).
| Taxable trading income | £ |
|---|---|
| 2024/25 (1 June 2024 – 5 April 2025) (£22,750 + (3/12 x £64,800)) | 38,950 |
| 2025/26 (6 April 2025 – 5 April 2026) ((9/12 x £64,800) + (3/12 x £85,800)) | 70,050 |
(3). Cobb has transition profits of £11,400 (£23,000 – £11,600) which have not yet been taxed.
These untaxed transition profits will be spread evenly over the remaining three years of the five-year period of taxation. Accordingly, £3,800 (£11,400 / 3) of these profits will be subject to income tax in 2025/26.
(4). The loss can be offset against general income of 2025/26 (the year of the loss) and/or 2024/25 (the previous year).
Where a claim has been made against general income, a further claim can be made against the chargeable gains of 2025/26 and/or 2024/25.
The loss can be offset against general income of 2022/23, 2023/24 and 2024/25 (the three years prior to the year of the loss on a first in, first out basis).
Any loss remaining will be automatically carried forward against future profits of the same trade.
