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Property Company Losses: What You Can (and Can’t) Do
23 April 2026
Accounting & Compliance, Ambitious Startups, Building a Business, Property Investors & Developers, Property Owners, Reducing Tax
Property companies don’t always make profits.
Whether due to high repair costs, void periods, or market conditions, losses can and do arise.
The key question is:
How can those losses be used to reduce your tax bill?
The answer depends on the type of loss and as with most things tax, the rules are not always straightforward.
The Two Types of Property Losses
A UK property company can generally incur two types of losses:
1. Income Losses
These occur when expenses exceed rental income, for example:
- Repairs and maintenance
- Interest costs
- Letting fees
- Other deductible expenses
2. Capital Losses
These arise when a property is sold for less than its purchase price (after adjustments).
While both types of losses can reduce tax, they are treated very differently.
How Income Losses Work
Income losses from a property business are relatively flexible.
Step 1: Use Against Current Profits
A property loss must first be offset against the company’s total profits and gains in the same accounting period.
This means if your company also has trading income, the property loss will reduce those profits.
If the property company is part of a group, they can also be offset against profits of another group company in the same period.
Step 2: Carry Forward
If the loss isn’t fully used, it can be carried forward and offset against future total profits, provided the property business continues.
You must claim this relief in your corporation tax return.
A Key Condition: Commerciality
To use property losses, the rental activity must be commercial, meaning it is carried out with a genuine intention to make a profit.
This is particularly important where:
- Properties are let to family members
- Rent is below market value
If HMRC considers the activity non-commercial, loss relief may be denied.
How Capital Losses Work
Capital losses are more restrictive.
Step 1: Offset Against Gains in the Same Period
If you sell a property at a loss, it is automatically offset against any chargeable gains in that accounting period.
Step 2: Carry Forward
If unused, the loss is carried forward.
However, it can only be used against future chargeable gains.
Not against trading or rental income.
Key Takeaway
Unlike income losses, capital losses:
- Cannot reduce general profits
- Can only reduce gains
- Offer less flexibility overall
The Loss Relief Restrictions
Even when losses are available, there are limits on how much can be used.
Income Loss and Capital Loss Restriction
For both types of losses arising on or after 1 April 2017:
- Companies can use up to £5 million of brought-forward losses
- Plus 50% of remaining profits
What This Means in Practice
Large losses cannot always be used immediately.
Instead, relief may be spread over multiple accounting periods which can impact cashflow and tax planning.
Why This Matters for Property Companies
Understanding how losses work is essential for:
- Managing cashflow
- Planning disposals
- Structuring property ownership
- Avoiding unexpected tax liabilities
For example:
- Selling a property at a loss won’t reduce your rental profits
- Letting a property below market value could restrict loss relief
- Large historic losses may not be fully usable in one year
Without careful planning, valuable tax relief can be delayed — or even lost.
How We Can Help
Property tax can become complex quickly, particularly when losses, disposals, and multiple income streams are involved.
We support property companies with:
- Maximising the use of available losses
- Structuring property ownership tax-efficiently
- Planning disposals and reinvestment
- Ensuring compliance with current legislation
Getting in Touch
If you’d like to understand how your property losses can be used effectively (or whether you’re missing opportunities) book a discovery call with our team or call us on 01634 731390.
We can help you make the most of your position and plan ahead with confidence.
Our services
If you would like to find out more about some of our services that might help you please take a look at our related pages:
Property Investors & Developers
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The content in this blog is correct as at 23 March 2026 See terms and conditions.
