Glossary · UK
What is Qualifying Loan Interest?
Interest on a loan used to invest in a close company or partnership, deductible from total income at the marginal tax rate -- unlike buy-to-let mortgage interest.
Full Definition
Qualifying loan interest allows taxpayers to deduct loan interest from their total income for income tax purposes (rather than against property income only). The loan must be used to: (1) buy ordinary shares in or lend money to a close company where the taxpayer owns 5%+ of the ordinary share capital and works for the company; (2) invest in a partnership as a partner; or (3) acquire machinery or plant used in employment. This gives full marginal-rate relief (40% or 45%) unlike the buy-to-let finance cost restriction which gives only a 20% basic rate credit. The interest must be commercial and the original purpose condition must continue to be met. Claimed via the reliefs section of the self-assessment tax return.