Can you offset interest against share dividends?

[traxx]

Obviously a lot of stockbrokers these days offer cheap finance to buy shares at say 80% LTV

But let's say for arguments sake you borrow at say 3% put down the other 20% and buy a share yielding 5%

Are you liable to pay tax on the 5% or the income adjusted for finance costs?

Equally is CGT net of finance?

Given that banks will lend against a stock portfolio how can you assign the finance to a particular stock?

[sumo69]

You would only get tax relief on the borrowing cost if you were assessed as a share dealer ie you are trading.

If not (which is likely) then no income tax or Capital Gains relief for your finance costs.

David

[Hyper10]

To be fair to Sumo, your question isn't asked in a particularly clear way. The question should be perhaps " when buying CFD's are my financing costs deductible"

The reason I say this is because you mention 20% margin. ( If i've got that wrong I apologise)

If the above is correct and you are dealing via a CFD, the without a doubt the whole matter is dealt with under CGT and not income tax. HMRC's own site has very clear guidance on this, I found it after my return was queried as I deducted dealing costs from my CGT and the officer questioned this.I found on their own site their position and copied it, they straight away accepted it.

The whole thing relates only to buying on margin, not the actual shares, if you buy on margin a position in Vodafone, anything out of that position is lumped up and the overall sum on the account after notional profit+ divs -all costs is the amount and it is overwhelmingly likely to be GCT. Their own issued public guidance is clear that it is CGT.

As I say my response is based on you buying on margin under a CFD but your comment on 20% leads me to think it is a CFD.
And yes good div shares are in my experience good for a CFD portfolio as they offset financing costs.
I can't find the exact HMRC guidance as I'm away from the office .

[traxx]

It's not CFDs

The offer Is that I can borrow up to 80% of the value of my FTSE shares at 3% to use to trade

[sideways sid]

Surely if you have a clear audit trail and can demonstrate that the financing is a reasonable cost wholly incurred in the course of the business, it should be deductible as a business expense for tax purposes.

[Eric Mc]

Is it a business?

[sumo69]

That was the point I was making above - if it is a business of share dealing then finance costs would be deductible.

David

[Eric Mc]

Exactly.

Many people assume what they are doing is in the nature of a "business" but HMRC may classify that activity as something else.