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Losses from a property business are calculated in the same way as losses from a trade.

Losses made on the same type of property are automatically offset against profits made on other properties in the same portfolio for the same period – being ‘pooled’ together.

Separate ‘pools’ are used for similar types of property, e.g. those not let on a commercial basis and foreign properties. Thus, two distinct and separate ‘pools’ will be created should there be both UK and foreign properties in a portfolio.

Losses on furnished holiday lettings (FHLs) are also kept separate and cannot be offset against either other UK rental profits or profits made on foreign properties.

Losses
Joan owns two properties – one in France and one in London.
She lets out both properties – the London one for the full year but the one in France for only two months over the summer. She makes a net profit on the property in London but a net loss on the one in France. Neither constitutes an FHL.

The loss on the French property cannot be offset against the profits made on the London property and must be kept separate.

However, the loss can be carried forward and deducted against any profit made on any future lettings of the French property or indeed, on any other overseas non-FHL properties Joan might subsequently acquire.