What happens to a loss on a rental property?

Across the UK, rental-property loss rules come from UK tax legislation, and Capital Gains Tax is not devolved. A rental loss is usually trapped inside the property business, while a sale loss is usually trapped inside the capital gains system.

Can you carry forward a loss on a rental property?

A rental loss carries forward automatically and never expires — it runs until that same property business’s own profits absorb it, and it cannot touch salary, self-employment or dividends. The Income Tax Act 2007 gives the relief by carrying the loss into later years: “The relief is given by deducting the loss in calculating the person's net income for subsequent tax years,” but it also says the deduction is “only from profits of the business.” That is why “losing money on rental property” is not normally a tax deduction against employment income or other personal income. The only route to general income is the narrow property loss relief where the loss has a capital-allowances connection or the business has a relevant agricultural connection; the Act states that condition as “the loss has a capital allowances connection or the business has a relevant agricultural connection.” The often-quoted £50,000 or 25% of income limit is not a property allowance of its own: section 24A includes “relief under section 120 (property loss relief against general income)” inside one combined cap shared with share loss relief. Abodient can track rent due, rent received, expenses and the figures a landlord needs for a tax return, which matters because a carried-forward property loss only becomes useful when later property-business profits appear.

Can you offset capital losses against your income?

A capital loss on selling a rental property goes against capital gains only, not income, and the income-tax election people quote for losses covers qualifying shares, not property. TCGA 1992 keeps capital losses within the capital gains regime unless another Income Tax Act relief applies, saying that relief “shall not be given under this Act if and so far as relief has been or may be given in respect of it under the Income Tax Acts.” The separate income election is for share losses: ITA 2007 section 131 applies where “the individual incurs an allowable loss for capital gains tax purposes on the disposal of any shares,” not where a landlord sells a buy-to-let at a loss. That distinction is the practical answer to “Can I offset capital losses against income in the UK?”: a loss on the rental property sale can reduce other chargeable gains, but it does not reduce salary, rental income, self-employment profits or dividends.

Last reviewed August 2026.

Sources

• ITA 2007 s118(2) — “The relief is given by deducting the loss in calculating the person's net income for subsequent tax years (see Step 2 of the calculation in section 23).” Source
• ITA 2007 s118(3) — “But a deduction for that purpose is to be made only from profits of the business.” Source
• ITA 2007 s119 — “Continue to apply Step 2 in relation to the profits of the business for subsequent tax years until all the loss is deducted.” Source
• ITA 2007 s120(1)(b) — “(b)the loss has a capital allowances connection or the business has a relevant agricultural connection.” Source
• ITA 2007 s24A(6)(d) — “(d)relief under section 120 (property loss relief against general income);” Source
• TCGA 1992 s2(3) — “Except as provided by section 62, an allowable loss accruing in a year of assessment shall not be allowable as a deduction from chargeable gains accruing in any earlier year of assessment, and relief shall not be given under this Act more than once in respect of any loss or part of a loss, and shall not be given under this Act if and so far as relief has been or may be given in respect of it under the Income Tax Acts.” Source
• ITA 2007 s131(1)(a) — “(a)the individual incurs an allowable loss for capital gains tax purposes on the disposal of any shares in any tax year (“the year of the loss”), and” Source