Help! My rental income doesn't cover the mortgage

Q I am an "accidental" landlord: I bought a one-bed flat then got a job quite far away, so decided to rent it out. I use an agent, pay all fees, insurances, bank charges and so on. However, the rent doesn't even cover my mortgage payments, so it looks like I have ended up with a loss – when I deduct all mortgage charges and other costs my tax return comes to minus a few hundred pounds. Does that make me eligible to reclaim money from the tax office or does it mean I don't need to pay tax on my rental "income"? KV A If the rent less your expenses gives you a minus figure, you have indeed made a loss. That means you don't have to pay tax on your rental income – but it doesn't mean you can ask for money back from your tax office. You can use the loss only to reduce tax on future rental income; you cannot use a loss from letting property to reduce the tax on income from a job, for example. So you will need to keep a record of this tax year's loss to carry forward to next year's tax return. But before you do this you should check your figures. The reason for this is that you can only deduct mortgage interest from your rental income, you can't deduct any capital repayments. So if you have a repayment mortgage on the flat you can't deduct all your mortgage costs – only the interest part. You can, however, deduct the whole mortgage cost if you have an interest-only mortgage, as the entire amount of your mortgage payments is made up of interest.