Question:
I took a loan of my mortgage and invested the money elsewhere to get higher rate of interest. To explain with an example, I took withdrew £60,000 from my mortgage and put this money in a savings account which gives me 3% AER while my mortgage is 0.98%. Now I have to pay 0.98% on £60,000 to my bank. Do I pay tax on the difference? ie 3% less 0.98% or the entire 3% because I am paying interest(0.98%) on the loan anyway
Arthur Weller replies:
You are not a money lender running a money lending business, but an individual investor. Therefore you pay tax on the entire 3%, but the 0.98% is not an allowable expense to offset against the 3%.
