Does a business loan affect my corporation tax

2 min read

Loan ≠ incomeNot taxed

Interest reliefReduces profit

Capital neutralNot deductible

How it works

Borrowing is not revenue — the loan you receive isn't taxable income, and repaying the capital isn't a deductible expense. What does affect tax is the interest: for a loan used wholly for the business, interest is generally an allowable expense that reduces taxable profit and therefore your corporation-tax bill.

What this means for your company

So a business loan modestly reduces tax via interest relief, without the borrowed sum ever being taxed. This makes the after-tax cost of borrowing lower than the headline rate. Keep interest and capital clearly separated in your records so the deduction is correct, and confirm treatment with your accountant. See how a loan affects corporation tax for detail.

What it means for you

Credicorp lends to your company, not to you personally, and takes no personal guarantee. See business loans or apply online.

Frequently asked questions

Is a business loan taxed as income?

No. A loan is borrowed money you must repay, not income, so it isn't subject to corporation tax. Only the interest you pay affects tax — as a deductible expense that reduces taxable profit.

Does repaying the loan reduce my tax?

The capital repayment doesn't — it's returning borrowed money, not a cost. Only the interest portion is deductible. So borrowing lowers tax slightly via interest relief, not through the repayments themselves.