Business loans

SIMPLY_2

Hello,
Just a quick question, I have a business loan approx £90k...repayment £1100/m for the next 9 years ( of which £350 is interest which I assume is allowable against tax ?) The remainder is I take it classed as a taxable income ?
I'm a sole trader. Also I have an opportunity to pay off this loan with savings and a loan from a family member (wanted no interest but I insisted on giving him some).
Now my question is would it be financially better to pay of the loan and save all that interest going out or is it better to keep the loan going for any tax benefits there might be ???

thanks
Simply

CLAPTON

The interest is allowable against tax

I don't know what you mean ..'the remainder is classed as taxable income'
neither the loan itself or the repayments are income and are not taxable.

All things being equal, whether you are better off using savings or continuing with the loan simply depends upon what interest you are earning on the savings (net of tax) compared to what interest you are paying on the loan (net of tax) ... you haven't said what the APRs are.

SIMPLY_2

Thanks for the reply Clapton, please ignore the income dribble as I was still half a sleep when I wrote it. I'm guessing that £350 is allowable against tax and the remainder will have to be paid plus tax. So if profits are in the 40% bracket I'm in effect saving 40% tax on £350/m.
If I pay the loan off then I'm going to be paying more tax ?

Then like you say there's the matter of which rates the loan and the savings are hitting.

Does that sound about right ?

cheers
Simply

CLAPTON

I assume you wish to maximise your total disposable income rather than minimise tax ..

In that case, simply compare the interest you are earning on your saving net of tax with the interest you are paying on the loan net of tax.