TAX and Mortgage Interest

MrOJones

Hi,

I started renting out my flat as it was no longer needed it for a home. I'm coming up to my first tax bill.

I've been told I can offset the interest I've paid on my mortgage on the income tax bill. Is this true?

info

flat bought June 06 for £125k (on a mortgage £79k - capital repayment on £450pm) fixed at 4.59%.

Started renting it out in September 07 for £750pm for 12 months which has recently ended.

Is it possible to offset any interest paid on my flat against profits earned from rental income?



Thanks for any help.

The_Tax_Man

I'm not sure I understand exactly what you've done but I think you are saying you have a mortgage of 79k @ 4.59% = GBP302 per month of interest repayments.

Short answer is yes, interest payments on the mortgage are deductible along with ground rent, service charge, gardening, buildings insurance etc...

If the flat is furnished then you can also deduct 10% from your gross rental receipts to cover any wear and tear on the flat. Finally, remember to only report income and expenses earned to 5 April 2008 on this year's return. The rest should be reported next year.