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TonyTax, Tax Consultant
Category: Tax
Satisfied Customers: 15979
Experience:  Inc Tax, CGT, Corp Tax, IHT, VAT.
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We own a second home/holiday cottage that we let out. If we

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We own a second property/holiday cottage that we let out. If we sell it, can we offset losses (of costs) against the capital gains or is this a flat rate percentage that is fixed and if so that is the rate? THanks



Is the cottage let under the holiday let rules or on 6 month or longer tenancies? What losses are you referring to?

Customer: replied 4 years ago.

We let the cottage through an agency, only for short holiday lets. We have accumulated losses each year with costs of repairs/damp courses/building works etc versus income from property. We are also paying just under £8000 per year on mortgage interest payments.



Leave this with me while I draft my answer.

Hi again.


Unless your cottage was let within the holiday let rules which you can read about here, I'm afraid that you cannot offset the excess of letting expenses over letting income against capital gains. In any event, only the excess of annual trading losses over other income can be offset against capital gains of the same tax year or the previous tax year. See page 1 of HS227 here. If your property was not within the holiday let rules, then it is not a trade for tax purposes and you cannot offset annual letting losses against capital gains.


If your cottage is within the holiday let rules, you can benefit from entrepreneurs' relief which would mean you would pay Capital Gains Tax at 10% as opposed to the regular rates of 18%, 28% or a combination of the two rates depending on the level of your income in the tax year of disposal. Read about entrepreneurs' relief here. You could also claim business asset rollover relief if you decided to buy another business asset. Read about that here.


I hope this helps but let me know if you have any further questions.

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Customer: replied 4 years ago.

Thank you so much. I will investigate further.