Carrying forward and offsetting property losses

Question Can I offset rental income loses against future rental income or the capital gain?

Also, how long can I hold onto the losses for? For example if I sell a property with a rental income loss but buy another several years later, can I still take across any rental losses?

Ian Says
Here are some pointers for consideration:

Commercial Properties

Rental income losses can only be offset against rental income profits of the same or the following year. The rentals must be on a commercial basis with a view to profit.

Any peppercorn rents and the losses arising on these are ignored for this purpose.

In practice if you have a number of properties all rented out on a commercial basis then the results are amalgamated to form your rental profit or loss.

Residential Properties

Rental income losses can not be offset against CGT or any other form of income unless they arise from furnished holiday lettings, which are treated differently for income tax purposes.

These losses can be offset against other income.

Rental losses incurred from overseas properties can only be offset against profits arising on the same properties in future years.

How far Forward?

The question of how far forward you can carry rental losses is a tricky one, where you have stopped renting for several years and then recommence.

Intention is key here!

If it was your intention when selling the old rental property to purchase another one and rent it out, but didn't do so until several years later, then provided you can prove the intention then the Revenue may allow the carry forward of the loss to be set against the profits arising on the new property, provided they were both on similar terms.

In other cases the rental losses may be lost when the rental income stops. It is really a question of how long between the rentals and intention as to whether the Revenue will allow the loss to be used.