I have three buy-to-let flats which generate a small income. I have recently let my principal private residence (PPR), on which I have a mortgage, due to moving to a different area. I have had to rent a slightly more expensive flat on a two-year tenancy (I went along the rental route due to timing and not wanting to be in an uncertain moving chain). The figures are monthly rental income on my PPR of £2,145; monthly mortgage payment on my PPR of £880; monthly service charge expense on my PPR of £300; gross monthly income from PPR: £965; and monthly rental expense or payment on the new flat: £2,448. My question is: do I declare rental income on my PPR as I do for my buy-to-let properties, and if so, can I offset the rental I pay where I am currently living? 

Arthur Weller replies:  

Firstly, according to the rules since April 2017, the £880 monthly mortgage payment is not an allowable expense in your rental tax computation. Therefore, your net rental income from this property is £1,845. However, assuming you comply with the conditions, you are entitled to deduct £880 x 20% = £176 from your final tax bill. See HMRC’s Property Income Manual at PIM2054 (tinyurl.com/hmrc-pim2054), PIM2056 and PIM2058. However, to answer your question, unfortunately, the monthly rental expense of £2,448 is not an allowable expense in your rental tax computation, because it is deemed a personal expense and is not related to your rental business.