The loss compares to a £6m profit the year before, although United's previous results included an £18.1m settlement from West Ham over Carlos Tevez.
Turnover fell from £32.1m to £20.5m as television money dropped £10m to £4.4m.
Gate receipts also decreased by £2m to £4.9m, and the club are no longer receiving parachute payments of £13m, paid for two seasons after relegation. However, Blades chairman Kevin McCabe said decisions have been taken at the club which are hoped to leave them clear of "external" debt by 2013.
"Some tough decisions have been taken to totally reshape the group," said McCabe.
"The time is right to ensure the club is positioned to avoid the type of damage that is currently afflicting or set to affect so many other football clubs.
"Our aim is still to generate revenue and profits from our business to fund all football activities with the clear objective of getting United back to the Premier League at the earliest opportunity."
United were relegated from the Premier League in 2007 in circumstances they believed were unfair. They claimed Tevez was not eligible to play at the end of the 2006/7 season, yet played a key role in West Ham's survival at United's expense.
An independent tribunal ruled Tevez was ineligible and the Hammers were ordered to pay compensation.
