Is business loan interest tax-deductible, and

2 min read

InterestUsually deductible

CapitalNot deductible

Lower net costAfter tax relief

How it works

For a loan used wholly for the business, the interest is normally an allowable expense that reduces taxable profit, so you get corporation-tax relief on it. The capital you repay is not an expense — it's returning borrowed money, not a cost of trading. Arrangement fees are often deductible too. Your accountant confirms the treatment for your specific loan.

What this means for your company

Tax relief on interest lowers the real cost of borrowing. If your company pays corporation tax at 25%, roughly a quarter of the interest is effectively refunded through a lower tax bill — so the true cost is below the headline rate. Factor this in when comparing borrowing against using cash. See also how a loan affects corporation tax.

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

Can I deduct the whole loan repayment from profit?

No — only the interest portion (and often fees) is an allowable expense. The capital repayment isn't deductible, because you're returning borrowed money, not incurring a trading cost. Your accountant can split the two correctly.

Does tax relief make borrowing cheaper than it looks?

Yes. Because interest reduces taxable profit, the after-tax cost of the interest is lower than the rate implies. At a 25% tax rate, roughly a quarter of the interest is offset by tax relief.