Utilising losses from a property rental business

Where a landlord makes a loss on their property rental business, the options for using that loss are limited. The rules depend on whether an unincorporated landlord or a company carries on the business.

Unincorporated landlords

Where a landlord has an unincorporated property business, the general rule is that if a loss is made in that property rental business, it is carried forward and set against the first available profits of the same property rental business. The relief is given automatically and there is no need to make a claim.

Example

Peter lets out a property on a long-term residential let. In 2023/24 he makes a loss of £1,200. In 2024/25 he makes a profit of £4,600.

The loss of £1,200 from 2023/24 is carried forward and set against the profit of his property rental business for 2024/25 of £4,600, reducing the taxable profit for that year to £3,400.

Where a landlord has more than one property in a single property business, the losses from one are set against the profits from another in arriving at the profit or loss for the business as a whole for a particular year – there is no need to consider each property separately.

Example

Jane lets out three properties. The properties comprise a single property rental business. In 2024/25 she makes a loss of £6,000 on one property, a profit of £4,300 on another property, and a profit of £7,100 on the third property. Her profit for the business as a whole is £5,400. The loss on property 1 is automatically relieved against the profits on properties 2 and 3.

Where a landlord has more than one property rental business, the losses made in one company cannot be set against the profits of another property business. For example, a loss in 2023/24 on an FHL business could not be set against a profit in 2023/24 on a separate property rental business.

However, the abolition of the FHL regime from 6 April 2025 will mean that any unused losses from the former FHL business as of 5 April 2025 can be used against the profits from the amalgamated property business beyond that date.

If a property business ceases, relief for unused losses is lost, even if the landlord starts up a new rental business at a later date. Care must be taken if there is a pause in letting where there are unused losses as relief will only be available if the same business, rather than a new business, continues after the pause.

Corporate landlords

Where the property business is carried on through a company, the loss must first be set against the company’s total profits for the accounting period. Thereafter, it must be carried forward and set against future total profits of the same property business. Any unrelieved losses at the date of cessation are lost.

Partner note: ITA 2007, Pt. 4, Ch. 4; CTA 2010, Pt. 4, Ch. 4.

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