Loans that do qualify
The best known case is a loan to buy shares in a close company, or to lend money to one that uses it wholly and exclusively for its business, as HMRC's Savings and Investment Manual (SAIM10210) describes. Section 393 adds conditions: the company must not be a close investment-holding company when you pay the interest, you must not have taken capital back out of the company, and you must either work full time managing the company or hold a material interest in it. HMRC says relief is not due if you or your spouse or civil partner claim Enterprise Investment Scheme relief on the same shares.
Check the conditions for your loan type before you rely on the estimate. A loan that only partly meets the requirements is dealt with separately in the Act (section 386) and is not modelled here.
How the relief is worked out
Relief equals the eligible interest you paid in the tax year. It is given on a claim, by deducting the interest when working out your net income (section 383). This calculator estimates the tax saved as the relief multiplied by the marginal income tax rate you type in. It does not split the saving across tax bands or between earned, savings and dividend income.
Qualifying loan interest is one of the reliefs that section 24A caps. The total of those reliefs cannot exceed the greater of £50,000 or 25% of your adjusted total income. Enter your adjusted total income and any other capped reliefs, such as trading loss relief, and the calculator limits the relief to what is left under the cap.
Worked example: a qualifying loan
A £40,000 qualifying loan at 7.5% for 12 months costs £3,000 in interest. For a 40% taxpayer with adjusted total income of £60,000 the cap is £50,000, so all £3,000 is relieved. The income tax saved is £1,200, the interest costs £1,800 after tax, and the after-tax rate is 4.50% a year against 7.50% with no relief.
Worked example: the cap
Borrowing £1,000,000 at 8% for a year costs £80,000 in interest. With adjusted total income of £100,000 the cap is £50,000 (25% of the income is only £25,000, so the £50,000 floor applies). Only £50,000 is relieved, £30,000 gets no relief, and a 40% taxpayer saves £20,000. The after-tax cost is £60,000, or 6.00% a year.
Inputs for the investment loan tax deduction calculator
What the loan was used for
Choose a general share portfolio or anything else for no relief, or a qualifying loan for the relief estimate.
Amount borrowed, interest rate and months
Interest is the balance times the yearly rate times the months borrowed divided by 12, assuming a level balance.
Your marginal income tax rate
The rate on your top slice of income. You type it because it depends on your income, where you live and the tax year.
Adjusted total income and other capped reliefs
Used only for the section 24A cap on a qualifying loan. Leave other reliefs at 0 if you claim none.
CALCULATOR QUESTIONS
UK investment loan tax deduction calculator questions
Can I claim tax relief on interest from a loan to buy shares in the UK?
Not for a general portfolio of listed shares or funds. Section 383 of the Income Tax Act 2007 lists the loans that qualify and a general portfolio loan is not among them. Relief can apply to some other loan kinds, such as a loan to buy shares in a close company.
How is relief on a qualifying loan given?
On a claim, as a deduction when your net income is worked out for the tax year in which you pay the interest. The calculator estimates the saving at the marginal rate you enter.
Is there a limit on the relief?
Yes. Qualifying loan interest is one of the reliefs that section 24A caps at the greater of £50,000 or 25% of your adjusted total income.
Does this cover buy-to-let mortgage interest or company loans?
No. Landlord finance costs get a separate tax reduction, and companies are taxed under corporation tax. This page is for an individual borrowing to invest.
What if my loan was used for several purposes?
The Act deals with loans that only partly meet the requirements separately (section 386). This calculator treats the whole loan as one kind, so take advice before relying on it.