I bought a property in December 2011 and rented my previous house. The buy to let mortgage was taken out on my previous house from December 2011. My previous house was rented from May 2012 to date. How will the tax be worked out?  Will it be from the date that I rented the property or from the date the mortgage was taken out?  Also I have a repayment buy to let mortgage, is this a good idea or shall I change it to interest only? I also did a drive way so that the tenants can park the car, is this an allowable expense?

Arthur Weller replies:

See HMRC’s guidance

(www.hmrc.gov.uk/manuals/pimmanual/PIM2505.htm) that a property business begins when it first receives income, which would be May 2012 in your case. You were paying interest from December 2011, which could be argued to be a pre trading expense. However I think it is more likely to be classified as 'Interest payable on property only partly used for rental business', about which you should read www.hmrc.gov.uk/manuals/pimmanual/PIM2105.htm. With regard to the mortgage, whichever kind you have, it is only the interest element that is allowable for tax, and not the capital repayment element. About the driveway, if there was a driveway there before, and you just repaired it, then that would be an allowable expense, but if there was no driveway before and you put one in, then that is called an improvement, and classified as a capital expense, which can only be offset against the capital gain when you sell the property. 

See www.hmrc.gov.uk/manuals/pimmanual/PIM2020.htm.