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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.
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.
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.
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.
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.
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.
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).
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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