Rental losses and S24

[Sandi]

Hi All

I have large rental losses brought forward and just wondered how they interact with the new S24 legislation.

I am concerned that the way the calculation will work means that I effectively do not get any relief for this years mortgage interest.

if anyone is in the know and would care to share that would be very much appreciated.

Thanks in advance

[jpkeates]

Carried forward losses, if applied, reduce income (the loss is a cost).
I don't really see how that interacts with the changes in interest relief, though.

[tatemono]

I agree with jpkeates. Have you filed self-assessment before? Losses as you describe are entered separately and deducted from income.

[Gordon999]

Previously, taxable profit = rental income- property repairs - mortgage interest = Remainder charged at 20% or 40%

New taxable profit =rental income - property repairs = Remainder charged at 20% or 40% minus Loan Interest x 35% ( reducing 5% to 2020).

If you have rental loss from last year , then taxable profit = rental income- property repairs - last year loss = Remainder.

[Sandi]

Previously, taxable profit = rental income- property repairs - mortgage interest = Remainder charged at 20% or 40%

New taxable profit =rental income - property repairs = Remainder charged at 20% or 40% minus Loan Interest x 35% ( reducing 5% to 2020).

If you have rental loss from last year , then taxable profit = rental income- property repairs - last year loss = Remainder.

So for myself if I have 20k loss brought forward. 10k rental income - 1k repairs and 7k mortgage interest then I will have 20 - (10-1) = 11 c/f.

Is this correct?

[Gordon999]

The latest tax return will ask for rental income details for year ending 5 April 2017.

Rental Income = 10K , repairs 1K and b/f 20K ( from April 2016)

Profit/Loss = 10K-1K = 9K - (20K) = (11K) c/f

[jpkeates]

How did you manage to get a £20k loss against £10k income?

[Sandi]

How did you manage to get a £20k loss against £10k income?

I used to have a 5 bedroom property that used to cost me £1,700 per month if it was empty for a month. I have now sold this property and still have the losses remaining.

[jpkeates]

Blimey, that's a lot of interest.

It's an interesting point (and one that I am not qualified to answer).

The restriction on the tax relief available for interest is quite specific - and doesn't seem to accommodate a situation where the costs of the tax cause a loss that has been carried forward.

The loss being carried forward is separated from the cause of the loss, on your return it's just a loss, so it would be very hard for HMRC to see where the loss arose without doing a lot of cross checking.
And a carried forward loss isn't addressed in the new restriction rules, so it might be legitimate to treat the loss as simply any other loss.

It means people would end up paying less tax, so I imagine that HMRC wouldn't see it that way if they noticed it, though.

[Sandi]

Thanks for your reply I am comfortable that the loss brought forward will not be affected by the new legislation.

I think what I was hoping was that I would somehow get some relief for the interest that I have paid in the current year.