New Rules About Rental Losses

Up until now, someone incurring losses on a residential rental property has been able to offset these losses against other taxable income (from salary and wages, business income etc).

This was seen as creating an unfair advantage in the property market, since investors could use any tax refunds received to their benefit. For example, to subsidise their mortgage payments, or to pay more for properties than other buyers can who didn't have the same advantage. Then, when the property was sold, they would also have the benefit of a tax free capital gain.

To remove this advantage, the Government has now introduced new rules so that the rental losses are "ring fenced". In other words, they can only be offset against future rental income, and not against other taxable income. These changes will apply from the 2019/2020 income year (so for most taxpayers - from 1 April 2019).

If someone owns several residential rental properties, depending on circumstances these may be grouped ( in which case the loss on one rental property could still be offset against the profit on other rental properties), or each property treated as a stand alone.

There is no similar ring fencing for commercial rental properties.

If you have any questions about these new rules, please give me a call on 07 282 0325 or fill in the form on the contact page.