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To give you a definitive answer, you'd be best to ask a good insurance broker. It's possible that some landlord insurance policies may not require you to declare the income, but I can't think of anyone on the forum offhand who's an insurance specialist. I do know a couple who might be able...

The interest would be tax deductible if you rent the flat and you decide to declare it. You'd also have to pay tax on the income and capital gains tax on a portion of the property when you sell. There's a good chance that the income from the flat will be greater than the costs associated...