Property losses for individuals

Produced by Tolley

The following Owner-Managed Businesses guidance note Produced by Tolley provides comprehensive and up to date tax information covering:

  • Property losses for individuals
  • Calculating a loss
  • Normal rules for property loss relief
  • The amount of loss that can be utilised
  • Losses incurred in opening years
  • Unused losses at cessation
  • Property business losses set against general income
  • Loss relating to excess capital allowances
  • Loss relating to agricultural expenses
  • Making a claim
  • More...

Property losses for individuals

For income tax purposes, rental profits from land and buildings are categorised as either:

  1. a UK property business, or

  2. an overseas property business, see the Overseas property business for individuals guidance note

England, Wales, Scotland and Northern Ireland make up the countries of the UK. The Isle of Man and the Channel Islands are treated as overseas for the purposes of the legislation.

This means that UK rental profits are pooled together and reported as one business, and overseas rental profits are pooled together and reported as one business. This guidance note refers to a UK property business, but the rules apply equally to an overseas property business.

The exceptions to this are:

  1. furnished holiday lettings which are calculated and reported separately, see the Furnished holiday lets guidance note

  2. properties let at an uncommercial rent, as the expenses are limited to the amount of the rent, see the Allowable expenses for property businesses guidance note

UK property businesses are considered further in the Taxation of property income for individuals guidance note.

This guidance notes looks at the income tax rules around property losses. For corporation tax rules on property loss relief, see the Property business losses for companies guidance note.

Calculating a loss

Property business losses are calculated in the same way as property business profits.

From 2017/18 onwards, there are two possible bases that can be used to calculate property business profits and losses:

  1. the simplified cash basis, which is the default basis for calculating profits and losses, unless certain conditions are met, see the Simplified cash basis for unincorporated property businesses guidance note

  2. the accruals basis, see the Taxation of property income for individuals and Allowable expenses for property businesses guidance notes

Prior to 2017/18, profits and losses were calculated on the accruals basis, unless the gross rental profits did not exceed £15,000, in which case a non-statutory cash basis could be used. If used, the cash basis needed to be used consistently, and the overall result

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