Share interest costs

Our Experts Answer:

If you borrow money using the security of an investment property to purchase shares, then the interest cost is related to the anticipated dividend income from the shares. From a tax perspective, what matters is the purpose that you borrow the money for and not the asset that it is secured against.

Having said that, if you own the investment property and the shares in the same entity, then at the present moment it does not particularly matter what you claim the interest against because everything will be part of the same melting pot if you like.

Where things will get interesting, though, is post 1 April 2019 when we expect the ring-fencing of rental losses to be enacted. Using the principle just stated, any loss produced through claiming interest on money borrowed to buy the shares against dividend income should be able to be offset against other forms of income, whereas the rental loss will be ring-fenced.