Your friend is right — this is one of the more generous reliefs in the system, and your timing works in your favour.
What you’re describing is called sideways loss relief: you can set a trading loss against your other (general) income of the same tax year, the previous tax year, or split it between the two. Your £9,000 loss arose in 2025/26, and your £11,000 of PAYE earnings from January to March 2025 falls in 2024/25 — the previous year — so you can carry the loss back against that employment income and get a repayment of the PAYE tax suffered on £9,000 of those earnings.
A few rules. You can’t make a partial claim: you must relieve as much income as possible. There’s a cap on total Income Tax reliefs — the greater of £50,000 or 25% of your adjusted total income — but at £9,000 you’re nowhere near it. The trade must be run commercially with a view to profit, which a genuine freelance design business is.
It doesn’t reduce your personal allowance: the loss reduces your taxable income, which the tax calculation then applies your allowance and rates to. And you can’t claim the same loss twice — what you use against 2024/25 can’t also be carried forward.
Claim it on the Self Assessment return for the year of the loss (2025/26): use the ‘loss to be offset’ boxes on the self-employment pages and show the amount set against 2024/25 in ‘any other information’. The deadline for a 2025/26 loss claim is 31 January 2027. GOV.UK’s helpsheet HS227 on trading losses walks through the claim boxes in detail.
One choice to weigh: you decide how much goes to each year, so if you expect 2025/26 freelance profits to be taxed at a higher marginal rate than your old PAYE income was, it can pay to keep some of the loss for the current year. Otherwise, carrying it back is the straightforward win.
