What tax should I pay on the house I let?

Q Six months ago, I had a One Account mortgage with an £83,000 facility, but only £5,000 outstanding. However, by the nature of how the account works, I still have the facility until the whole amount is paid off. I then increased this facility to buy a new house. It was increased to £275,000. I moved into the new house and rented out the old house. I did ask at the time for the mortgage company to separate both mortgages but they said they can't. My question, therefore is that when it comes to rental income and tax, where do I stand? Do I deduct the whole amount of mortgage interest (ie for both houses) from any rental income profit or do I split the interest in half or work it out on the value of the rental house? I do not have a buy-to-let mortgage on the other property, just one interest-only mortgage that covers both. Obviously, my lender knows that I am renting out the other house but this doesn't help with tax returns. SL A You cannot claim all the mortgage interest. You can claim only the interest that relates to the house you are renting out. So the proportion of the interest you can claim will depend on the value of the rental property at the time you stopped living in it and started letting it – or, to be technical, the property became an asset of your rental business. To work out the percentage, take the value of the rental property when you moved, divide by the total mortgage and multiply the result by 100.