I've been renting out and submitting self-assessment tax returns on my rental income for a number of years. In 2025, I decided to refurbish my property as it was in need of repair and replacement. I did this myself, which meant the property was off the market for one year. Consequently,in the tax year, my expenses (i.e., materials, new kitchen, etc., handyman labour) were larger than my rental income for 2025 to the tune of £8,000. I understand that there is provision for sideways loss relief I can make. Can I do this via my standard self-assessment submission? I’ve also split the expenses between maintenance revenue and improvement capital expenditure; maintenance for all restoration, and the kitchen as capital, so potentially offset against capital gains should I sell. Is that correct? My labour has been considerable but, for tax purposes, has been free, which is, I presume, the best way to deal with this. 

Arthur Weller replies:  

You are correct that the expenditure should be split between revenue expenditure, which can be offset against rental income, and capital expenditure, which should be offset against capital gains when the property is sold. You are right that you cannot claim for your own personal time (see HMRC’s Property Income Manual at PIM2210 and Capital Gains Manual at CG15210). You are also right that there is a sideways relief for rental business losses against general income, but if you look at PIM4220, you can see that it only applies to the extent that the losses are attributable to: (a) certain capital allowances; or (b) certain agricultural expenses. Otherwise, rental business losses can only be carried forward and offset against future rental business profits (see PIM4210).