For many investors, annual property tax losses are generated, once all costs and allowances are taken account of.  This tax loss is carried forward each year for offsetting against future rental profits.

However, these losses are extremely valuable, as once rental profits are made, these accumulated tax losses are used first, meaning profits are received tax-free.

In effect, the investor is building up a ‘tax asset’, to be used in the latter stages of the life of the rental business.  It is therefore essential that, in the early years of their rental business, investors are diligent in ensuring the maximum possible rental loss is generated each year.

Also, many investors don’t realise that any losses generated by capital allowances can be offset against other income immediately.  This can generate an actual tax repayment now, rather than in the future.

One final tip about rental losses – they are lost forever when an investor sells their last investment property, so investors should only sell that last property when all their losses have been used up.

Remember – tax losses are a future asset.

Contact Stephen Fay ACA at Fylde Tax Accountants for specialist advice on all aspects of property tax:

Tel: 01253 350 123
Email: stephenfay@fyldetaxaccountants.co.uk