Amounts you receive in the form of interest on investments or deposits. The transactions that fit within this category must be derived from activities outside of your normal trade. For example if you were lending money such as a bank or financier this would form an integral part of your trade and be considered trade income not interest gained.

What's included

Any interest received on investments, for example on a bond, term deposit or savings accounts.

Interest you charge to your clients for not paying you on time. For example you might want to charge them a little extra (generally at the Bank of England rate) if they are continually paying their invoices later than your terms.

What's not included

Loan interest received, if the loan was made as an integral part of your normal trade.

Mark ups on your invoices shouldn't be recorded here either.

How is it taxed?

These amounts are taxed as you show them in your accounts, unless your loan agreements are complex such as a derivative or hedge contract or with connected parties - then separate tax advice is recommended.

Special rules apply to interest repayments from HMRC (VAT/CT).

Tax tips

Interest will be shown on your tax return as 'loan relationship' income and 'deficits' (expenses).

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