If your receipts in an assessment period are less than your expenses, income tax and NI contributions (but not adding pension contributions), this amount is a loss.
A loss from a previous assessment period is deducted from the next assessment period in which there is a profit.
The loss is deducted from your self-employed earnings worked out as above after tax, NI contributions and pension contributions are deducted.
If there is not enough profit to use up the whole loss, the amount left over (the ‘unused loss’) is carried forward.
If there are unused losses to apply from more than one assessment period, these are deducted in order starting with the earliest.
Losses from a previous UC award are offset against profits in a new award if the break in your claims is no more than six months.
However, losses from months between awards cannot be offset unless you have made a UC claim for those months.