2.4 Deductible interest

Total income – qualifying interest paid = Net income

• Deductible interest is given tax relief by being deducted from total income to compute net income (before the deduction of PA)

• Deduction sequence: 1) Non-savings income 2) Savings income 3) Dividends income

• Unused amount this year: wasted

Qualifying purposes for deductible interest

• Loan to buy plant or machinery for partnership use

• Loan to buy plant or machinery for employment use

• Loan to buy interest in employee-controlled company

• Loan to invest partnership

• Loan to invest in a co-operative