PIM1020 - Introduction: what is a UK property business?
Source: gov.uk (2025-06-09)


UK property business - legislation

'UK property business' includes all activity for generating income from land in the UK. See section 264 of the Income Tax (Trading and Other Income) Act 2005 (for taxpayers in charge to income tax (IT)) and section 205 of the Corporation Tax Act 2009 (for taxpayers in charge to corporation tax (CT)).

A UK taxpayer may also have an overseas property business – see PIM1025 (https://www.gov.uk/hmrc-internal-manuals/property-income-manual/pim1025).

Property business: what is it?

Profits from UK land or property are treated, for tax purposes, as arising from a business.

Since the 2017-18 tax year the cash basis (see PIM1090 (https://www.gov.uk/hmrc-internal-manuals/property-income-manual/pim1090) onwards) is the default way of reporting the profits or losses of a property business for IT customers. However, profits or losses of a tax year must be calculated in accordance with GAAP if certain criteria are met - most notably if the landlord is a company or other CT customer (see PIM1100 (https://www.gov.uk/hmrc-internal-manuals/property-income-manual/pim1100) onwards). Before this change however, the vast majority of landlords had to use GAAP.

The broad scheme is that property business profits are computed using the same principles as for calculating the profits of a trade but the taxpayer is not actually treated as if they are trading – unless they meet the normal trading tests (see BIM60000 (https://www.gov.uk/hmrc-internal-manuals/business-income-manual/bim60000)). Thus, for example, CGT reliefs for traders are not normally available.

More information about rents and other receipts is given at PIM1050 (https://www.gov.uk/hmrc-internal-manuals/property-income-manual/pim1050) onwards.

More information about the expenditure that can be deducted from receipts to arrive at taxable property business profit is given at PIM1900 (https://www.gov.uk/hmrc-internal-manuals/property-income-manual/pim1900) onwards.

Who carries on a property business?

Any person or body of persons carries on a UK property business if:
- they own or have an interest in land or property in the UK; and
- they enter into transactions that produce rents or other receipts liable to IT or CT from that land or property.
The list of those who carry on a property business includes individuals, partners, trustees, personal representatives, trustees in bankruptcy and companies, including non-residents with UK property income. For more about trusts see PIM1045 (https://www.gov.uk/hmrc-internal-manuals/property-income-manual/pim1045).

A person will carry on a property business even if they engage an agent to handle it for them. The person carries on the business through the agent.

All property business activities treated as one

In most cases all the various types of income from land and property in the UK are treated as parts of the same, single property business. It does not matter how many properties the taxpayer has, or how many different types of income from land and property. This is clear from section 264(a) (UK property businesses) and section 265(a) (overseas property businesses).

This means that normally all the property business receipts and expenditure can be amalgamated and, hence, that the expenses on one property can be deducted from the receipts of another.

However, if a landlord has income from property in the UK and income from property outside the UK, the landlord is treated as having two businesses: a UK property business and an overseas property business – legislation does not amalgamate them.

If a landlord has Furnished Holiday Lettings (FHLs), the profits are part of the taxpayer’s UK or overseas property business – FHLs are not a third category of property business.

There are also special rules for:
- jointly owned property and partnerships - PIM1035 (https://www.gov.uk/hmrc-internal-manuals/property-income-manual/pim1035),
- trusts and trustees - PIM1045 (https://www.gov.uk/hmrc-internal-manuals/property-income-manual/pim1045),
- properties which are not let on commercial terms - PIM2130 (https://www.gov.uk/hmrc-internal-manuals/property-income-manual/pim2130),
- agricultural land - PIM4224 (https://www.gov.uk/hmrc-internal-manuals/property-income-manual/pim4224),
- receipts from letting a room or rooms in the taxpayer’s own home under the rent-a-room scheme - PIM4000 (https://www.gov.uk/hmrc-internal-manuals/property-income-manual/pim4000) onwards,
- furnished holiday lettings - PIM4100 (https://www.gov.uk/hmrc-internal-manuals/property-income-manual/pim4100) onwards; and
- activities carried on in different capacities - see the paragraph below.
The furnished holiday lettings rules cease to apply in tax years commencing on or after 6 April 2025 for Income Tax and for Capital Gains Tax, and 1 April 2025 for Corporation Tax and for Corporation Tax on chargeable gains.

Activities carried on in different capacities

In law an individual can act in different legal capacities. Property business activities are treated as parts of a single business where the activities are carried on by the same person acting in the same legal capacity. Where different legal capacities are involved different property businesses will result.

It may be that an individual has property income in a number of different capacities. They could, for example:
- hold property in their own right,
- be a member of a partnership, and have a part share in property which the partnership lets,
- be a trustee of a trust receiving rental income.
These would all have to be treated as belonging to different property businesses.

Trustees, executors and partners are common examples of cases where a person acts in a different legal capacity. Executors, for instance, act on behalf of the estate of the deceased and not for themselves. Any property business conducted in a different capacity must be kept separate from any personal property business. A loss on one cannot be set against a profit on another. For more about life interest trusts see PIM1045 (https://www.gov.uk/hmrc-internal-manuals/property-income-manual/pim1045).

Who is charged to income tax

PIM1030 (https://www.gov.uk/hmrc-internal-manuals/property-income-manual/pim1030) discusses who receives property income.