What can you do with property losses?
The general concept when it comes to multiple lettings is that income and expenditure is treated as one business. Any income and expenditure in relation to overseas properties, however, will be treated as a separate business from the UK properties.
In terms of income tax relief for any losses made on a property, this can’t be used to relieve tax on profits for previous years, or for general income. However, there may be a few exceptions.
In order to consider whether there is entitlement to relief on losses, you should consider whether the loss is in relation to the following:
- Uncommercial letting – you won’t be entitled to any relief
- Furnished holiday letting – relief may only be claimed against FHL profits for later tax years
- Agricultural land – relief can be set against landlord’s general income for the year of loss or following year
- Capital allowances, or letting of agricultural land – relief offset against general income for the landlord, in the year of the loss or the following year. Any losses not utilised can be carried forwards and used in future years
Please note in regards to capital allowances that furnishings and equipment can’t be included in this, though any items purchased for use in managing the property by the landlord and not the tenant may be claimed (e.g. computer equipment, garden equipment).
If none of the above apply the relief can only be claimed against property business profits of the landlord for later years.
The relief is deducted in calculating net taxable income for the year. You will have to specify the tax year in which the deduction is to be made – either the year in which the loss has arose, or in the next tax year. Please note that a claim for relief against general income will need to be made on or before the first year has passed – so a claim for 22/23 will need to be made by 31st January 2025.
If you have any questions or require any advice specific to your circumstances, please contact us at PJCO. You can book a free discovery call by clicking the link below!