Can I use previous years losses to reduce profits

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  • Trex_99
    started a topic Can I use previous years losses to reduce profits

    Can I use previous years losses to reduce profits

    Over the years I've made a £50k loss from renting property. This year Ive made £3k profit. My question is, is it ok to deduct some of the previous years losses to offset against this years profits? So that on my tax return I can enter £0 profit made?
    I normally just carry all my losses forward but if I dont use them whats the point?


  • JamesHopeful
    replied
    I have racked up similarly-sized carried over losses myself. In my case, it's been because I've undertaken a couple of top-to-bottom refurbishments each year for several years on the trot (and before anyone says it, yes I did consider very carefully which elements of the refurbishment expenditure were revenue in nature and which elements were capital).

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  • boletus
    replied
    Originally posted by AndrewDod View Post
    The only time I have ever had a 50K loss is when a massive service charge of around that amount was levied for major repairs to a leasehold flat. Otherwise it is pretty difficult. So please explain how you did that.
    I doubt the OP will respond after so long Andrew.
    But I've worked with blokes overseas who racked up similar losses so I'll have a stab at explaining;

    Large, expensive, family home out in the sticks, totally unsuitable for renting out, awful yield. They just want a nice place to come back to with someone helping out with the costs in the meantime.

    Annual mortgage interest £20K
    Rent £18K
    Less letting agent fees, insurance, repairs, voids etc £12K income, £8K loss.
    6 years working overseas = £50K (aprox) cumulative loss.

    Unless they've had very unlucky timing, they've probably made well over that £50K in capital appreciation. A hedge on UK property prices if you like.

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  • AndrewDod
    replied
    The only time I have ever had a 50K loss is when a massive service charge of around that amount was levied for major repairs to a leasehold flat. Otherwise it is pretty difficult. So please explain how you did that. I am suspicious and HMRC would be likewise.

    Have you put in a tax return every single year explaining those losses? And calculating them correctly? Like not including full mortgage payments unrelated to interest. Or including capital costs.

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  • Gordon999
    replied
    If you have losses from past years to carry forward, then you should submit a paper tax return every year before end of Oct .

    On your tax return for 2017-2018 , you may have gross rent = £10,000 and maintenance expenses = £7000, so your rental profit = £3000.

    Your losses from past years = £50,000 are brought forward and added to the current year profit £3000 = £47,000 loss to carry forward to next year. . .

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  • AshC
    replied
    Trex_99 - yes you can - see similar question in HMRC's forum

    https://online.hmrc.gov.uk/webchatpr...list/2792.page

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  • DPT57
    replied
    You can't just make it up. There are procedures for carrying forward tax losses from one year to another and it will depend on what your tax return says for the previous year.

    If you were making £50k loss then why are you bothering to continue? If I were HMRC I would want to look at little closer at your accounts but they don't have the staff so actually, you can probably just keep making it up

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