Ohh Exciting - accounts

[smilodon]

Here's a fascinating question on an equally fascinating subject - business accounts.

I'm in the process of buying and furnishing a holiday let cottage with the wife. We're planning on running it as a general partnership (maybe sole traders) and using the cash accounting system. We'll get an accountant at some point but I'm curious about one thing.


In the first year 2021 - 2022 we're going to spend a shedload of money fitting the place out with furniture, redecoration, white goods etc. etc. all of which will be for the sole use of holiday let, so I'm assuming these expenses will all be tax deductible.
It seems very likely that we'll spend far more on stuff than we will earn in profit in 2021-22 meaning we'll have no tax bill for this year.
However is there any way we can take the rest of the expenses and off set them against tax for future years? Would this be a Trading loss?

I'm not asking for proper financial advise but wondered if anyone had had a similar situation? Cheers.

[Penfold]

I think the basic answer is yes. Losses can be offset/carried forward against future years.

If you made a loss of 10,000 in year one then a profit of 12,000 in year two you'll only be liable for the 2,000. Make use of all your allowances and minimise your tax.

The only thing I would consider is buying the holiday let in a company name and not a personal one. Not sure if it's too late but the tax liabilities are a lot less in a limited company. Is it part of the main house you're buying or separate?

I use this forum for anything I'm not sure about https://forums.landlordzone.co.uk

Give us a shout if I can help. Not done holiday lets but been buy-to-let landlord for about 25 years.

[smilodon]

Cheers I will check the forum out. Early days yet.

[A Twig]

Wot Penfold says - worked for Trump, chuffing huge loss in year one sets you up for years. Only thing is the value of that "loss" will in real terms inflate away so don't get too carried away - i.e. your £10k profit in year 10 will be worth less in real terms than your £10k loss today. On the flip side that "loss" should increase your equity (i.e. the value of the property) so it should be a win win.

IANA accountant but my wife and father are - so I get tax blurb in both ears every week... There are pros and cons of limited company vs sole trader - I don't know your circumstances at all so not going to write a huge essay here on hypotheticals but I would definitely recommend paying for professional advice from an accountant / tax adviser to ensure you set yourself up and structure your business and your works in the most tax efficient way. A decent accountant should be able to explain your options and do a decent business forecast based on worst and best scenarios (assuming you have some sort of business plan) for around £400.

[TeaLeaf]

It's a complex topic.  Try starting here and then discuss with your accountant - never appoint one too late.

https://uklandlordtax.co.uk/allowable-expenses-against-rental-income/