renting out a house/flat

[microserf]

soooo, we're thinking worst case scenarios after some bad news.

if we were to rent out our new house, does anyone know how tax on the rental income is calculated? as i see it, we can deduct allowable expenses from the taxable amount.

my big question is: do the allowable expenses INCLUDE the cost of the interest on the mortgage (as opposed to the capital repayments, which are clearly NOT allowable expenses).

We've just done this (for the second time).

You're right. The allowable expensenses do include the cost of the interest, any other costs associated with renting the property (agents fees etc)

A list of allowable expenses
here

For me it is:
gross rent received
less

mortgage interest
agents fees
insurance
any repairs/upkeep

deduct losses from previous year
deduct tax free allowance (if applicable)

= taxable income