05: Relief for interest

You can deduct any interest you have paid from business profits or the profits from property letting. The interest must be incurred wholly and exclusively for the purpose of your business or property letting.

You can deduct other interest you have paid from your income if you took out the loan for a qualifying purpose. Qualifying loans – which are generally subject to special rules – include loans to:

• Acquire shares in, or lend money to, a close company or partnership.
• Buy plant and machinery for use by a partnership or in your employment (employees’ car purchase loans are excluded).
• Contribute capital to a co-operative.
• Invest in an employee-controlled company.
• Lend money to personal representatives to provide funds to pay inheritance tax.

Relief is not available for interest on loans to acquire enterprise investment scheme shares or for interest on a personal overdraft.