'If you already owned the property or only had a small mortgage on it then interest on any additional borrowings from a remortgage/top-up cannot be set against rental income - just interest on the outstanding amount used to purchase it. Does that address your question?'
Thanks ClubMan, that's what I was worried about. I was hoping to remortgage (to the max) my apartment which has presently only a small mortgage and turn it into a interest only mortgage and use the extra cash to buy another property, while renting out the apartment. As my mortgage is quite low for the apartment, the interest that I can offset against the rental income would be low. So it seems that I will end up paying high amounts of tax. It may be better to sell the apartment...