Personal tax - capital expenditure and interest on loans

Bamboogarden

So I'm going through the green light tests and it asks if these are exempt:

Installing solar panels
Interest on the loan taken out to buy solar panels

I selected the first one as exempt because it's capital expenditure and wrongly chose exempt for the solar panel interest.
Why is the interest on the loan taken out to buy solar panels allowable against rental income?
Does this mean that all interest on loans taken out against capital expenditure allowable?

Thanks if anyone can explain this to me.

CeeJaySix

Yes, generally interest is allowable, assuming the borrowing that the interest arises on is used for business purposes.

So assuming the solar panels are an improvement to a rental property (reading between the lines of your post), the interest on the loan to fund them would be allowable.

If the loan was to finance solar panels on the sole trader's own house, it clearly wouldn't.

Similarly interest on a mortgage on a rental property is also allowable, whereas interest on your own home mortgage clearly isn't.