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Summer 2004 Newsletter

Home-a-Loan

Can you remember when you got tax relief on your mortgage? It's a distant memory now - but, fortunately, interest rates have stayed fairly low since the tax relief was abolished. It was something worth having in the 1980s, where you could get 60% relief on the interest at high rates on a loan of £30,000 - which, in those days, could buy more of a house than it can now.

It's still possible to get interest relief for some borrowing - for business, or for buy-to-let renting. The tax relief effectively reduces the interest rate - if you are a 40% taxpayer and the loan costs 10% to the bank, in effect it's only 6% because you reduce your income tax. So a 10% business loan could be cheaper than a 6.5% mortgage on your house.

Whenever you are thinking of borrowing money for a big project, it's worth thinking about the tax relief that might be available. If you borrow for something not tax-deductible - for instance, your own home - it's much harder to move the borrowing around afterwards to attach it to business or rent.

So, if you have a business or a rental property, or you are thinking of acquiring one, it's worth considering the most tax-efficient way of funding the purchase. We will be pleased to advise you.