If you have a loan or overdraft facility in your bank, you will sometimes incur interest on these balances. This account represents the extra amount you pay for those facilities.

What's included

  • Bank or financier interest incurred on loans or overdrafts.

  • Interest incurred on late payment of taxes or other amounts owed to suppliers.

What's not included

Exchange Rate Variance is not the same as interest paid.

How is it taxed?

  • Tax relief should follow your accounts but if you have any complex hedging, derivatives tax advice may be required. Also if you have interest free loans please check with a tax adviser if this may trigger any additional reporting (typically under directors loan account or arms-length principles).

Look at the restriction link below if you are planning to claim over £2 million in interest deductions for the year.

Tax tips

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

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