Rental Losses — Can You Offset Them Against Other Income in 2026?

How Rental Losses Arise

A rental loss occurs when your total allowable expenses and reliefs for a tax year exceed your total rental income. This can happen legitimately — for example, where you have significant repair costs in a single year, an extended void period, or where the portfolio is heavily geared and the Section 24 rules mean a large proportion of interest is no longer reducing profit directly.

It is important to note that the **Section 24 finance cost credit** is applied after the profit or loss is calculated. This means that even where a landlord has a notional "profit" for the purposes of the finance cost credit calculation, the underlying rental profit figure (before the credit) may itself be a loss.

The General Rule: Losses Must Be Carried Forward

For the vast majority of individual residential landlords, rental losses **cannot** be offset against other income such as employment earnings, self-employment profits, or dividends. Instead, they must be **carried forward** indefinitely and set against future **UK property income** — that is, rental profits from any UK property in your portfolio in future tax years.

There is no time limit on carrying forward property losses. A loss made in 2025/26 can be used against rental profits in 2030/31 or beyond if necessary.

All UK Properties Treated as One Business

HMRC treats all of a landlord's UK rental properties as a single **UK property business**. This means you add together income and expenses from all properties before calculating the overall profit or loss. A profitable property and a loss-making property within the same portfolio are netted off against each other in the same year — you do not have to carry forward a loss from one property if another produces a surplus.

Losses and Section 24 — A Common Confusion

Under Section 24, mortgage interest is not deducted in calculating profit or loss — it is instead used to generate a 20% tax credit applied after the tax on profits has been computed. This means a property that is cash-flow negative might still show a taxable "profit" for Income Tax purposes, because the interest is not reducing the income figure.

Conversely, if your expenses (excluding finance costs) exceed your rental income, you have a genuine loss to carry forward, even though you may still benefit from the finance cost credit in a future profitable year.

When Losses Can Be Set Against Other Income

There are limited circumstances where property losses can be set against other income:

• **Furnished Holiday Lettings** — prior to April 2025, FHL losses could be offset against general income. This is no longer available following abolition of the FHL regime.
• **Agricultural land** — special rules apply in some circumstances.
• **Cessation of business** — terminal loss relief may be available if you dispose of your entire property portfolio and have unrelieved losses.

For the overwhelming majority of residential landlords, the rule is simple: losses carry forward, full stop.

Keeping Track of Losses

Unrelieved losses must be declared on your Self Assessment return each year, even if they cannot yet be used. HMRC needs to know the cumulative loss balance so it can be applied correctly when your rental business returns to profit. Keep a clear record of the original loss year and the amounts used in subsequent years.

Use our [rental income tax calculator](/rental-income-tax-calculator) to model scenarios where expenses outstrip income and understand how the carry-forward mechanism affects your future tax position.