About interest tax relief
You can claim tax relief on loan interest payments for the:
- purchase or extension of your main residence
- purchase or extension of a commercially let property
- purchase of machinery and plant
- acquisition of a trade, partnership share or trading company
as long as you have paid the interest you have been charged in the year of assessment.
Definition of an extension
An extension means something physically added onto the property.
This includes the construction of a:
- loft extension (if the roof line is extended)
Any part of a loan for home improvements or interior alterations can't be claimed.
Phasing out interest tax relief for your main residence
From the year of assessment 2017 the interest cap is reducing by £1,500 per annum until the interest relief is removed from the year of assessment 2026.
How interest relief on your main residence works
The interest is a deduction against your income at the marginal rate calculation of tax.
You can claim this tax relief for the purchase or extension of your main residence in Jersey.
the property must be a house or a flat
- the relief is only available at the marginal relief tax rate calculation
- there is a capital restriction of £300,000
- any restrictions are calculated on the total borrowing, not on each individual loan
- you must live in the property on a full-time basis
You’ll only receive mortgage interest tax relief if your lender has a source of Jersey mortgage income or profits chargeable to tax in Jersey.
Interest paid on mortgages held by share transfer will be granted tax relief if the conditions above are met.
Example of interest relief claim
You take out a loan for £350,000 with a Jersey bank to purchase your home in Jersey. The interest rate on your mortgage is 6%.
At the end of the year the bank sends you a certificate of interest paid (R62) showing interest charged and paid of £20,000 and a year-end capital balance of £345,000.
On your personal tax return you enter the capital (£345,000) and the interest (£20,000) that's on the R62.
Revenue Jersey calculate the interest relief as follows:
£300,000 / 345,000 x £20,000 = £17,391
This is then restricted to the reducing amount of interest relief that is allowable for the year. For example, £4,500 in 2023.
Use the tax calculator to see how this works to reduce your tax.
Mortgages in joint names
If you have a joint mortgage and more than 1 person claims the interest you would:
- enter the full amount borrowed that's stated on the R62(s)
- claim your share of the interest in proportion to the amount you pay
In the example above, if this was a joint mortgage, you would both enter the capital balance, £345,000. You would then each claim £10,000 interest.
Revenue Jersey would calculate each claim as follows:
£300,000 / £345,000 x £10,000 = £8,695
The total maximum relief for 2023 is £4,500, so you would each get £2,250 of interest relief.
Interest tax relief for the purchase or extension of letting property
The interest can be claimed as an expense against the letting income on loans used for:
- buying land or property which will be commercially let
- extending a commercially let property
There's no capital restriction on the interest deduction.
Interest tax relief for business purposes
Interest tax relief can be claimed for interest on loans used:
- to buy plant and machinery in a trade (claim this in your trading accounts)
- to buy plant and machinery used by an employee wholly and exclusively in earning the profits and earnings of an employment or office
- for acquiring a trade, a share in a partnership or a controlling interest in a trading company, whether in Jersey or elsewhere
Interest relief that you cannot claim
You cannot claim interest relief for:
- any part of a mortgage or re-mortgage that does not relate to the purchase or extension of your main residence in Jersey
- certain transactions between connected parties. For example, spouses 'selling' a house with no mortgage to the other and taking out a mortgage in the process for the purpose of gaining interest tax relief, while spending the money elsewhere
We'll challenge any tax relief applications if the loan has an artificially inflated rate of interest on capital over £300,000.