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Where Taxpayers and Advisers Meet

Can I offset Mortgage Interest against Interest Earned on a Loan

MickyV
Posts:16
Joined:Fri Jul 10, 2015 8:04 am
Can I offset Mortgage Interest against Interest Earned on a Loan

Postby MickyV » Thu May 10, 2018 10:31 am

I own most of a property company which needs to borrow money. If it goes to a bank it will have to pay around 3%. However, I have the opportunity to take out a personal mortgage on my own home at 2%.

If I take out the mortgage of say £100,000 at 2% and then lend the money to my company at 3%, am I allowed to offset my interest cost against my interest earned and so declare and pay tax just on the net £100,000 x (3%-2%) = £100,000 x 1% = £1,000?

bd6759
Posts:4262
Joined:Sat Feb 01, 2014 3:26 pm

Re: Can I offset Mortgage Interest against Interest Earned on a Loan

Postby bd6759 » Thu May 10, 2018 6:08 pm

No. There are no expenses deductions from interest.

MickyV
Posts:16
Joined:Fri Jul 10, 2015 8:04 am

Re: Can I offset Mortgage Interest against Interest Earned on a Loan

Postby MickyV » Fri May 11, 2018 11:56 am

What about if my Business made the mortgage payments on my behalf, in consideration for the use of the money. Could the business then treat that as an allowable expense without me having to pay tax on a benefit in kind?

bd6759
Posts:4262
Joined:Sat Feb 01, 2014 3:26 pm

Re: Can I offset Mortgage Interest against Interest Earned on a Loan

Postby bd6759 » Fri May 11, 2018 5:53 pm

The amount paid by the company would be taxable on you as employment income.

robbob
Posts:3228
Joined:Wed Aug 06, 2008 4:01 pm

Re: Can I offset Mortgage Interest against Interest Earned on a Loan

Postby robbob » Sat May 12, 2018 11:19 am

Hello MickyV
am I allowed to offset my interest cost against my interest earned and so declare and pay tax just on the net £100,000 x (3%-2%) = £100,000 x 1% = £1,000?
bd6759 is correct that there are no expense deductions from interest


However you can in certain circumstances (see linked article below) claim relief for interests costs when the borrowings have been lent to your limited company, this may offer you the tax relief you are seeking albeit it will not be directly linked to reducing the interest income declared (that may also be good with regard to your tax calc if your interest income is partly tax ed at 0%). The main criteria to watch out for is that the company still owes you a matching amount of money.


You may be able to claim relief for interest paid or for alternative finance payments where the loan or alternative finance arrangement is used to:
buy ordinary shares in, or lend money to, a close company in which you own more than 5% of the ordinary share capital on your own or with associates


https://www.gov.uk/government/publications/interest-and-alternative-finance-payments-eligible-for-relief-on-qualifying-loans-and-alternative-finance-arrangements-hs340-self-assessment-helpshee/hs340-interest-and-alternative-finance-payments-eligible-for-relief-on-qualifying-loans-and-alternative-finance-arrangements-2015


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