Property Finance

Property and rental losses guide for private landlords

Clever Accounts

What are rental losses?

A rental loss is created when property-related expenditure surpasses the rental income generated, during a single tax year.

Example: if you've earned £20,000 annually, in rental income but spent £25,000 on allowable property expenses, you have then accrued arental loss of £5,000.

Trading losses vs rental losses for individual landlords

If you are an individual landlord (personal property ownership), HMRC would treat your rental income as an investment or an additional income.

In that sense, any losses incurred would be perceived as rentallosses rather than trading losses.

Trading losses are attributed to losses created from the business's operation, while rental losses will be calculated by rental income and rental expenditure only.

Can I offset my rental losses against other types of income?

The short answer is no. That is due to HMRC's perception of rental income as an investment, rather than a general source of income.

Example: you wouldn't be able to offset rental losses against dividend income you may have received.

Can I offset my rental losses against other rental income?

Yes. You can offset rental losses between two or more properties you own.

Example: offsetting the annual rental loss made by property A, against the rental profit made by property B.

Can I carry forward any rental losses?

Yes, rental losses will carry forward automatically to offset profits made in the following years.

Example: you might accrue losses during the first year of renting a property, which could be carried forward and offset against profits generated during the following year.

Year Profit/Loss Rental loss brought forward to offset against profit Loss left to carry forward Profit after rental loss carried forward
2020 -£10,000 0 -£10,000 N/A
2021 £5,000 -£5,000 -£5,000 0
2022 £15,000 -£5,000 0 £10,000

Calculating rental loss on a jointly-owned property

Both rental profits and losses will be based on the shares you or your partner/s own. If you own 75% of the property shares and your friend owns 25%, any profits and losses will be attributed accordingly.

Jointly-owned property for married couples and civil partners

Normally, rental profits and losses should be split 50/50 between married owners or civil partners. However, there are cases where shares are allocated unequally, and in that case, you would have to declare beneficial interests in joint property and income (Income Tax form 17).

Where to declare rental losses?

Personal property owners can declare rental losses in their annual self-assessment tax return, under boxes1, 2, 17 and 18 of the 'Other UK income' section and the 'Other information'section.

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