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Income Tax set-off of rental business losses

Posted on 31st January 2022 - Income Tax

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Where a property business makes a loss, the loss can usually be carried forward and set against future rental business profits. HMRC’s guidance is clear that any losses made in one rental business cannot be carried across to any other rental business the customer carries on at the same time in a different legal capacity.

Under limited circumstances property losses can be set against general income of the same year or the following year. However, where a property business claims loss relief against general income, they must take the full amount of the loss available up to the amount of their general income.

Income Tax rental business losses can only be set against general income to the extent that they are attributable to:

  • certain capital allowances,
  • certain agricultural expenses

A claim has to be made on or before the first anniversary of 31 January following the end of the year of assessment. For example, where relief is to be claimed for the 2021-22 tax year, the normal filing date would be 31 January 2023 and the claim for property loss relief must be made by 31 January 2024.

There are exceptions to the loss relief rules for properties that are let on uncommercial terms (for example, at a nominal rent to a relative).

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