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Offsetting rental losses against other income.

Am I right in thinking that rental losses cannot be offset against employment income but can just be carried forward for relief against future rental profits?

Client is employed, can't sell his old house and has moved in with his new wife. He plans on renting it for a couple of years to a friend at the lower end of commercial rate (but still commercial) but the rent will not cover the mortgage interest and upkeep costs.

I believe you can only offset holiday lettings rental losses against other income but could someone please confirm the losses in the above scenario will not be able to be offset? Or explain if it can.

Thank you.


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By Anonymous
13th Jun 2008 11:57

Thank you
It's nice to get confirmation of thoughts when an area is not one you usually come accross.


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By Anonymous
13th Jun 2008 09:31

Rental losses generally only carried forward and set against any future rental profit.

If the property is not let on a commercial basis then technically the loss is not allowable, but I believe HMRC allow you to carry it forward to set against future rental profits from that same particular property and person.

FHL losses are treated as trading and therefore can be set against other income (s380 ICTA). Certain losses on agricultural land can be set against other income of the current of next tax year (s379A ICTA).

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12th Jun 2008 22:26

Thats my understanding of the legislation
Rental income losses on property(ies) can only be carried forward against future profits of that property(ies). That's my understanding of it.
Also yes holiday let losses can be offset against other income or carried forward.

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