I have bought a property to let out and it is possible in the 1st and maybe 2nd year I will make a loss after accounting for Mortgage Interest and loan interest used to get a deposit, and Insurances. Can I offset that loss against my earnings from employment during the same period? If so which IR form do I need to use?

Arthur Says

The answer is ‘no’, the losses cannot be offset against your employment income. However they can be carried forward and offset against future rental income profits that are generated from the property business.

If you have been making losses then it is important that you register these losses with the Inland Revenue. The reason for this is because any losses can be carried forward and offset against future profits.

Therefore for example, if in one tax year you made a £1,000 loss and then the following year you made a £1,000 profit then there is not tax liability as the £1,000 loss has been carried forward and wipes-out your future gain!

However if you have any other properties that are being rented out in the same tax year, at a profit, then the loss from the loss-making property can be set off against the profit from the profit-making property.

About Arthur Weller

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Arthur Weller is a Chartered Tax Advisor (CTA) and an integral part of the Property Tax Portal team. He offers a special rate tax advisory service on any aspect of UK taxation, including property taxation, for as little as £97 for a 30 minute telephone tax consultation.

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