Perhaps 'offset' is not the right word, but on https://www.gov.uk/renting-out-a-property/paying-tax it says that I can expense interest on a property loan (which is what I take the £40K mortgage to be).
More information on this can be found here
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I notice you have viewed my response to your question about tax relief on mortgage interest (JACUSTOMER-xvf39s2s- Last Viewed on 6/3/2015 at 10:01 AM).
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