From the 19/20 year onwards losses from a residential rental property can no longer be offset against other income such as salary, wages or other business income.
The loss from one rental property can be offset against other residential rental income if you choose to use the portfolio basis (if you own more than one property the rules can be applied to all your affected properties as a single portfolio).
If you have unused losses at the end of the year they will need to be carried forward and can be used to offset future income from residential rentals including taxable income on sale if the bright line rules are triggered and depreciation recovered (if you owned the property before 2010). In some situations, any remaining losses can be released from the ring fencing rules, but more often than not they will need to be carried forward until the day you receive surplus residential rental income again to offset the losses carried forward against.
Certain properties are excluded from the ring-fencing rules including your main home, farmland, property that the mixed-use asset rules apply to, business and commercial premises, to name a few.
If you are a client of ours holding residential rental property you will hear from us over the next few weeks with more specific information.
If you have any questions, please contact firstname.lastname@example.org