Borrowing is a key part of many business plans. It enables startup, facilitates growth and funds development. But before you start, you should consider the pros and cons of different types of borrowing - from the costs and pressures of repayment - to using tax relief to save you money.
So what tax relief options are available?
Tax relief on renting or leasing an asset
Renting or leasing assets can reduce your tax bill because the cost is deductible as a business expense.
By spreading the cost of acquiring assets, renting or leasing helps businesses manage repayments in line with revenue generation, ensuring cash flow remains manageable over time.
Renting or leasing can also facilitate business growth, by generating assets with expansion plans in mind.
Claim loan interest against tax
Interest on business loans is a deductible expense for calculating profit for tax if the loan is exclusively for a business purpose or property letting (when part of your business premises).
Interest on overdrafts and credit cards can be a deductible expense only when used for business purposes.
Borrow money for capital investment from pension schemes
Small self-administered schemes (SASSs) are pension plans designed for shareholding directors of small limited companies. Subject to certain conditions, the schemes allow borrowing for capital or fixed assets.
Interest earned by the pension scheme is not subject to tax. You also can claim tax relief on the loan interest payable to the scheme. SASSs effectively let a business borrow from itself.
More info
For more information on the types of borrowing discussed in this article, including further resources and examples, see the Business Link guide - Borrow money tax efficiently
Further information is also available on Asset Finance
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