Is it possible to crop a single layer, I can almost get the desired outcome using the eraser on a layer but surely it can be done with cropping?
Use a layer mask. Tutorials galore exist on the topic already, eg: http://helpx.adobe.com/photoshop/using/masking-layers.html
Straight from Adobe:
You can add a mask to a layer and use the mask to hide portions of the layer and reveal the layers below. Masking layers is a valuable compositing technique for combining multiple photos into a single image or for making local color and tonal corrections.
I can't believe no one suggested this yet:
Just use the rectangular marquee to select what you want to crop down to, and COPY it to your clipboard. Then delete the entire layer and PASTE what you copied to a new layer.
This is especially useful if the layer you're cropping is larger than the canvas, in which case the select-inverse technique is messy.
You can also select the area you want to crop to with the rectangular marquee tool, invert your selection, then delete the now selected outside area. This is different from the layer mask in that it completely deletes the surrounding area, whereas the mask makes the surrounding area invisible.
No, you can't crop a single layer.
The closest thing would be to copy the layer to a new image, crop that image, and copy the layer back to the original image.
It's easier just to erase or mask the part of the layer that you don't want.
You'd most likely want to use one of the marquee tools. This will select an area in a crop like fashion and you can then delete the inside or the outside by right clicking and selecting 'select inverse'.
and that is how i crop inside one layer :)
Just resize the layer using the transform tool. If you make the layer a smart object first, then you'll have the option to revert back to the original image size should you wish, without data loss.
A very easy trick: just crop it in another tab and move it back (screenshot here).
If you want to be able to change the size or shape of your crop you can also just make shape in a seperate layer and clip your image with a clipping mask on your shape. If you group the two after that you can move them as one. If you do this you're still able to change to shape of your crop afterwards.
You can also always just apply a layer mask you made by right clicking the layer and selecting "apply layer mask".
Select the area > fill..> background