Income Tax (Trading and Other Income) Act 2005 section 57B

Cash basis: interest payments on loans

Section 57B provides a limited deduction of up to £500 for loan interest payments when a sole trader or partnership calculates trade profits using the cash basis, even where such interest would otherwise be disallowed.

• When using the cash basis, loan interest is generally not deductible from trade profits under section 51A, but section 57B provides a limited exception.
• A deduction of up to £500 is allowed for interest paid during a period, even if the interest is not wholly and exclusively for trade purposes.
• The £500 cap applies to the combined total of interest claimed under this section and any incidental costs of obtaining finance claimed under section 58.
• The Treasury may change the £500 limit by order, but any reduction requires prior approval by the House of Commons.

---