Pay tax on interest from loan?

zappa_2001

Hi,

I've taken out a business load to fund a building project I am doing. I am paying the builders, architect, planners etc on an ad hoc basis during the build. As a result I thought it prudent to put all the spare money in a easy access savings account. I earn a little interest each month and use this money to help meet the interest payments on the business loan. There is of course a large shortfall between the two amounts.

I am being taxed at source on the interest I am getting in the savings account. Is this right and can I claim it back? I'm not making any money out of this arrangement, it's just helping me make payments on the business loan.

For info I am FT employed and pay tax on my earnings.

Any comments/help would be greatly appreciated.

fengirl_2

As a taxpayer you are liable to tax on the interest earned from all sources of income. The fact that the interest is then used to fund something else is irrelevent.
If the building project is a business, ie if you are planning to develop and then sell the property, the interest paid on the loan would probably be eleigible for tax relief.