I have paid my mortgage completely on my property which is valued at 180k. I want to move to a bigger property. The bigger property is 230k. I want to rent out property one ( hopefully, over 20 years house prices will go up and I'll make a profit). So property one will become a business (residential let). In order to be able to do this I will take out an interest only mortgage on property 2 (175k), and pay 55k cash.
My question is, do I have to pay ax on the £600 rental income on property one? Or is this offset by the £600 interest I'll be paying on property 2.
The only reason I will be taking a mortgage on property 2 is to fund the business (property 1).
Thanks in advance!