SAIM10040 - Relief for interest paid: general conditions: joint loans: examples

Examples of the relief available where spouses take out joint loans

Example 1

Mr and Mrs A took out a loan in joint names for £100,000 that was invested by Mr A in purchasing shares in a qualifying company. The interest paid on this loan in the tax year 07/08 totalled £10,000 and was paid from a bank account held jointly in the names of Mr and Mrs A.

Mr A would be able to claim relief for the full amount of interest paid in 07/08 of £10,000.

Example 2

Mr and Mrs A took out a loan in joint names for £100,000 that was invested as follows:

• £60,000 to purchase shares for Mr A in a qualifying company.
• £40,000 to purchase shares for Mrs A in a qualifying company.

The interest paid on this loan in the tax year 07/08 totalled £10,000 and this was paid from a bank account held jointly in the names of Mr and Mrs A.

Under these circumstances, the following relief for interest paid in the tax year 07/08 would be available:

• Mr A - £6,000
• Mrs A - £4,000

Example 3

Using the circumstances in example 2, what would happen if the loan was taken out solely by Mr A and he paid the interest from his own bank account?

The only relief available would be to Mr A for the £6,000 relating to the relevant proportion of his investment. The interest of £4,000 paid on the £40,000 invested in shares for Mrs A would not attract relief as this amount was not invested by Mr A for a qualifying purpose. It was used to provide funds to Mrs A with which she made the investment. Mrs A does not pay interest in connection with this investment and so no relief is due to her.