Very amateur landlord tax offset question

[revs88]

Hi Guys,

I'm hoping to get some advice from anyone who has some understanding of tax rules for landlords.

I’ve been renting out an unfurnished residential property and last year I made a loss of £3,000.

This year I’m expecting to make a profit of £6,000 after deducting expenses i.e. mortgage interest and agents fees.

Can I offset last year’s loss against this years gain? Not sure if it makes a difference but I pay income tax through PAYE and don’t have a limited company.

Just out of interest if I can offset the loss, from how many years back can you claim the offset back?

Cheers, Richard

[Eric Mc]

The simple ansewer is yes, you can bring forward the loss incurred in the previous tax year for offset against the rental profit achieved in the following tax year. Rental losses can be carried forward against rental profits indefinitely until they are used up.

Note that ytou are carrying the loss forward, not carrying it back. Rental losses can only be carried forward against future rental profits (unlike trading losses, which are much more flexible).

[revs88]

Thanks Eric.

I wasn't that clear on explaining the 2nd part of my question.

Let me try and rephrase - If I made a loss in 2006 of £1,000, a loss of £1,000 in 2007, a loss of of £1,000 in 2008 could I offset the cumulative loss of £3,000 over the 3 years against my profit in 2009?

[LC23]

Hi Revs

Yes you can. I assume that the rental property has been let out on a commercial basis at all times and not to a family member on mates rates at any point? The reason I say this is that a loss occuring when you are renting out to a connected party can only be carried forward and offset against future profits arising on rental to that same person.

[Eric Mc]

Yes.

You are, in effect, carrying foward the accumulated losses until you can offset tham against a profit. This is fully allowable.

The main thing to be sure of of is that you are claiming the correct types of expenses when arriving at each year's loss figure.

[revs88]

Thanks chaps for your thoughts.