1. Tax Relief if you make a loss in your business
You can carry forward losses to future years or carry back losses to previous years.For carrying back losses the rules are restricted and different depending on whether you are a Sole Trader or a limited company.
If you can carry back losses you can get a tax refund and if you carry forward losses you will have less tax to pay in the future.
3. Forming a limited company
This might not be a wise choice in your first years of business and especially if you are trying to set your losses off against your other income (as mentioned previously).
In the long run however, you will protect yourself and your business and as your profits increase you will make substantial savings every year if you convert to a limited company.
You can employ a non tax paying family member (you have to make sure they work in your business) and so reduce your profit and tax.
Also, if you are a limited company you can pay yourself tax free and the rest as a dividend.
6. Working Tax Credit & Children’s Tax Credit
If you do make losses or have reduced profits not only have you the benefit of saving tax and national insurance but you also have the advantage of receiving tax credits from the revenue.