http://www.legislation.gov.uk/ukpga/2005/5/part/4/chapter/2Income Tax (Trading and Other Income) Act 2005An Act to restate, with minor changes, certain enactments relating to income tax on trading income, property income, savings and investment income and certain other income; and for connected purposes.texttext/xmlenStatute Law Database2026-07-30Expert Participation2026-07-15 Income Tax (Trading and Other Income) Act 2005s. 168(6)(e) and wordPlanning (Consequential Provisions) (Wales) Act 2026Deddf Cynllunio (Darpariaethau Canlyniadol) (Cymru) 2026Sch. 2 para. 370(b)Sch. 5 Pt. 1s. 5(2) Part 4Chapter 23691Income tax is charged on interest.2The following sections extend what is treated as interest for certain purposes—section 372 (building society dividends),section 373 (open-ended investment company interest distributions),section 376 (authorised unit trust interest distributions), section 378A (offshore fund distributions), section 379 ( payments by registered societies or certain co-operatives ),section 380 (funding bonds), section 380A (FSCS payments representing interest), andsection 381 (discounts).3For exemptions, see in particular—aChapter 2 of Part 6 (national savings income),bChapter 3 of Part 6 (income from individual investment plans),cChapter 4 of Part 6 (SAYE interest),dChapter 6 of Part 6 (income from FOTRA securities),esections 749 to 756A( repayment interest, interest arising from repayment supplements, ... damages for personal injury, employees' share schemes, repayments of student loans, unpaid relevant contributions, the redemption of funding bonds , certain foreign currency securities and interest on certain deposits of victims of National-Socialist persecution) ...f. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .4Subsection (1) is also subject to Chapter 3 of Part 12 of ITA 2007 (exemption for interest on securities to which Chapter 2 of that Part applies) .5See also Chapter 3A of Part 14 of ITA 2007 (which provides for the receipts of certain types of company being wound up to be charged to income tax under that Chapter instead of under any other provision that would otherwise apply).3701Tax is charged under this Chapter on the full amount of the interest arising in the tax year.2Subsection (1) is subject to Part 8 (foreign income: special rules).370A1This section applies to the payment of an amount of interest in the form of—agoods or services, orba voucher.2Where this section applies by virtue of subsection (1)(a), the amount of the payment is to be taken to be equal to the market value, at the time the payment is made, of the goods or services.3Where this section applies by virtue of subsection (1)(b), the amount of the payment is to be taken to be equal to whichever is the higher of—athe face value of the voucher,bthe amount of money for which the voucher is capable of being exchanged, orcthe market value, at the time the payment is made, of any goods or services for which the voucher is capable of being exchanged.4In this section references to a voucher are to a voucher, stamp or similar document or token which is capable of being exchanged for money, goods or services.371The person liable for any tax charged under this Chapter is the person receiving or entitled to the interest.3721Any dividend paid by a building society is treated as interest for the purposes of this Act.2In this section “dividend”includes any distribution (whether or not described as a dividend) .3731This section applies if the distribution accounts of an open-ended investment company show the total amount available for distribution to owners of shares in the company as available for distribution as yearly interest.2Subsection (1) is subject to subsection (7) .3For income tax purposes payments of yearly interest are treated as made to the owners of the shares by the company.4. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .5The amount of the payment treated as made to each owner is so much of the total amount mentioned in subsection (1) as is proportionate to the owner's shares.6. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .7This section does not apply if the open-ended investment company is an approved personal pension scheme.8See section 375 for the interpretation of this section and section 374.3741This section applies for determining the date on which payments of interest under section 373 are treated as made.2The date on which the payments are treated as made depends on whether a date is specified for any distribution for the distribution period in question by or in accordance with—athe company's instrument of incorporation and its prospectus in issue for the time being (including any supplements), orbin the case of an open-ended investment company which is part of an umbrella company, such parts of those documents of the umbrella company as apply to the open-ended investment company.3If such a date is so specified, the payments are treated as made on that date.4If no such date is so specified, the payments are treated as made on the last day of that period.3751In sections 373 and 374 and this section—“approved personal pension scheme” has the same meaning as in Chapter 4 of Part 14 of ICTA (see section 630(1) of that Act),“distribution” includes investment on behalf of an owner of shares in respect of the owner's accumulation shares,“distribution accounts” means the accounts showing how the total amount available for distribution to owners of shares is calculated,“distribution period” means the period by reference to which that amount is ascertained,“the OEIC Regulations” means the Open-ended Investment Companies (Tax) Regulations 1997 (S.I. 1997/1154),“open-ended investment company” has the same meaning as in Chapter 3 of Part 12 of ICTA (unit trust schemes etc.) (see section 468(10) and (11) of ICTA, as inserted by regulation 10 of the OEIC Regulations),“owner of shares” has the same meaning as in that Chapter (see section 468(10) and (15) of that Act, as so inserted), and “umbrella company” has the meaning given by section 615 of CTA 2010. 2In subsection (1) “accumulation share” means a share in respect of which income is credited periodically to the capital part of the company's scheme property.3In subsection (2) “scheme property” has the same meaning as in Chapter 3 of Part 12 of ICTA (unit trust schemes etc.) (see section 468(10) and (13) of ICTA, as inserted by regulation 10 of the OEIC Regulations).3761This section applies if the distribution accounts of an authorised unit trust show the total amount available for distribution to unit holders as available for distribution as yearly interest.2Subsection (1) is subject to subsection (7) .3For income tax purposes payments of yearly interest are treated as made to the unit holders.4. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .5The amount of the payment treated as made to each unit holder is so much of the total amount mentioned in subsection (1) as is proportionate to the unit holder's rights.6. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .7This section does not apply if the authorised unit trust is an approved personal pension scheme.8See section 378 for the interpretation of this section and section 377.3771This section applies for determining the date on which payments of interest under section 376 are treated as made.2The date on which the payments are treated as made depends on whether a date is specified by or in accordance with the trust's terms for any distribution for the distribution period in question.3If such a date is so specified, the payments are treated as made on that date.4If no such date is so specified, the payments are treated as made on the last day of that period.378In sections 376 and 377—“approved personal pension scheme” has the same meaning as in Chapter 4 of Part 14 of ICTA (see section 630(1) of that Act),“distribution” includes investment on behalf of a unit holder in respect of the holder's accumulation units,“distribution accounts” means the accounts showing how the total amount available for distribution to unit holders is ascertained, and“distribution period” means the period by reference to which that amount is ascertained.378A1This section applies where—aa dividend is paid by an offshore fund, andbthe offshore fund fails to meet the qualifying investments test at any time in the relevant period.2The dividend is treated as interest for income tax purposes.3For the purposes of this section, an offshore fund fails to meet the qualifying investments test if the market value of the fund's qualifying investments exceeds 60% of the market value of all of the assets of the fund (excluding cash awaiting investment).4“The relevant period” means—athe relevant period of account of the offshore fund, orbif longer, the period of 12 months ending on the last day of that period.5“The relevant period of account” means—athe last period of account ending before the dividend is paid, in a case in which the profits available for distribution at the end of that period (and not used since then by distribution or otherwise) equal or exceed the amount of the dividend (aggregated with any other distribution made by the offshore fund at the same time), andbthe period of account in which the dividend is paid, in any other case.6This section applies to a manufactured overseas dividend if, and only if, it is representative of a distribution to which this section would apply.7In this section—“dividend” includes any distribution that (but for this section) would be treated as a dividend for income tax purposes;“manufactured overseas dividend” has the same meaning as in Chapter 2 of Part 11 of ITA 2007 (manufactured payments);“offshore fund” has the same meaning as in section 354 of TIOPA 2010 (see sections 355 to 363 of that Act);“qualifying investments” has the meaning given in section 494 of CTA 2009.3791Any dividend, bonus or other sum payable to a shareholder in—a registered society , orba UK agricultural or fishing co-operative,is treated as interest for income tax purposes if it is payable by reference to the amount of the shareholder's holding in its share capital.2In subsection (1)— “registered society” means— a registered society within the meaning of the Co-operative and Community Benefit Societies Act 2014, a society registered or treated as registered under the Industrial and Provident Societies Act (Northern Ireland) 1969, a society registered as a credit union under the Credit Unions (Northern Ireland) Order 1985 ( S.I. 1985/1205 (N.I. 12)), or an SCE formed in accordance with Council Regulation ( EC ) No 1435/2003 on the Statute for a European Cooperative Society, and“UK agricultural or fishing co-operative” means a co-operative association—which is established in the United Kingdom and UK resident, andwhose primary object is assisting its members in—carrying on agricultural or horticultural businesses on land occupied by them in the United Kingdom, orcarrying on businesses consisting in the catching or taking of fish or shellfish.3In subsection (2) “co-operative association” means a body with a written constitution from which the Secretary of State considers that it is in substance a co-operative association.4For the purposes of subsection (3), the Secretary of State must have regard to the way in which the body's constitution provides for its income to be applied for its members' benefit and all other relevant provisions.5In Northern Ireland subsections (3) and (4) apply with the substitution for “the Secretary of State” of “ the Department of Agriculture and Rural Development” ”.3801This section applies to the issue of funding bonds to a creditor in respect of a liability to pay interest on a debt incurred by a government, public institution, other public authority or body corporate.2The issue is treated for income tax purposes as if it were the payment of so much of that interest as equals the market value of the bonds at their issue.3In this section “funding bonds” includes any bonds, stocks, shares, securities or certificates of indebtedness (but does not include any instrument providing for payment in the form of goods or services or a voucher) .380A1Any payment representing interest which is made under the FSCS is treated as interest for the purposes of this Act.2“Payment representing interest” means a payment calculated in the same way as interest which would have been paid to the recipient but for the circumstances giving rise to the making of payments under the FSCS.3Where a payment representing interest is made net of an amount equal to a sum representing income tax that would have been deducted on the payment of interest, the amount treated as interest by this section is the aggregate of the payment representing interest and that sum.4This section applies to payments made under the FSCS whether or not they are made (in whole or in part) on behalf of the Treasury or any other person.5In this section “the FSCS” means the Financial Services Compensation Scheme (established under Part 15 of the Financial Services and Markets Act 2000).3811All discounts, other than discounts in deeply discounted securities, are treated as interest for the purposes of this Act.2In this section “deeply discounted securities” means securities to which Chapter 8 of this Part applies (profits from deeply discounted securities).S. 373(4)(6) repealed (with effect as mentioned in the commencing S.I.) by Finance (No. 2) Act 2005 (c. 22), ss. 17(1)(d), 19(1), 70, Sch. 11 Pt. 2(3); S.I. 2006/982, art. 2S. 376(4)(6) repealed (with effect as mentioned in the commencing S.I.) by Finance (No. 2) Act 2005 (c. 22), ss. 17(1)(e), 19(1), 70, Sch. 11 Pt. 2(3); S.I. 2006/982, art. 2Word in s. 369(3)(e) substituted (19.7.2006) by Finance Act 2006 (c. 25), s. 64(1)(a)Words in s. 369(3)(e) substituted (19.7.2006) by Finance Act 2006 (c. 25), s. 64(1)(b)S. 380 modified (7.4.2005) by Finance Act 2005 (c. 7), s. 55, Sch. 2 para. 10Words in s. 373(2) substituted (1.4.2006 with effect as mentioned in reg. 1(2) of the amending S.I.) by The Authorised Investment Funds (Tax) Regulations 2006 (S.I. 2006/964), reg. 91(2)Words in s. 376(2) substituted (1.4.2006 with effect as mentioned in reg. 1(2) of the amending S.I.) by The Authorised Investment Funds (Tax) Regulations 2006 (S.I. 2006/964), reg. 91(3)Words in s. 369(4) substituted (6.4.2007 with effect as stated in s. 1034(1) of the amending Act) by Income Tax Act 2007 (c. 3), ss. 1027, 1034, Sch. 1 para. 513 (with transitional provisions and savings in Sch. 2)Words in s. 372(2) substituted (6.4.2007 with effect as stated in s. 1034(1) of the amending Act) by Income Tax Act 2007 (c. 3), ss. 1027, 1034, Sch. 1 para. 514 (with transitional provisions and savings in Sch. 2)S. 369(3)(f) and word omitted (with effect in accordance with s. 34(8) of the amending Act) by virtue of Finance Act 2021 (c. 26), s. 34(4)(a)S. 372 excluded (1.3.2013) by The Building Societies (Core Capital Deferred Shares) Regulations 2013 (S.I. 2013/460), regs. 1(1), 3(1)(b) (with reg. 1(2))Words in s. 369(3)(e) omitted (with effect in accordance with Sch. 39 para. 53(3) of the amending Act) by virtue of Finance Act 2012 (c. 14), Sch. 39 para. 53(2)S. 379 heading substituted (1.8.2014) by Co-operative and Community Benefit Societies Act 2014 (c. 14), s. 154, Sch. 4 para. 94(2) (with Sch. 5)Words in s. 379(1)(a) substituted (1.8.2014) by Co-operative and Community Benefit Societies Act 2014 (c. 14), s. 154, Sch. 4 para. 94(3) (with Sch. 5)Words in s. 369(2) inserted (with effect in accordance with s. 33(5) of the amending Act) by Finance Act 2009 (c. 10), s. 33(2)Words in s. 380(3) inserted (with effect in accordance with Sch. 11 para. 12(2) of the amending Act) by Finance Act 2013 (c. 29), Sch. 11 para. 7S. 370A inserted (with effect in accordance with Sch. 11 para. 12(2) of the amending Act) by Finance Act 2013 (c. 29), Sch. 11 para. 6Words in s. 369(2) inserted (with effect in accordance with s. 39(5) of the amending Act) by Finance Act 2009 (c. 10), s. 39(2)Words in s. 375(1) substituted (1.4.2010) (with effect in accordance with s. 1184(1) of the amending Act) by Corporation Tax Act 2010 (c. 4), s. 1184(1), Sch. 1 para. 452 (with Sch. 2)S. 378A applied (1.12.2009) (with effect in accordance with art. 1(2)(3) of, Sch. 1 to the amending S.I.) by The Offshore Funds (Tax) Regulations 2009 (S.I. 2009/3001), regs. 1(1), 96(3)(a)Words in s. 378A(7) substituted (1.4.2010) (with effect in accordance with s. 381(1) of the amending Act) by Taxation (International and Other Provisions) Act 2010 (c. 8), s. 381(1), Sch. 8 para. 168 (with Sch. 9 paras. 1-9, 22)S. 369(5) inserted (1.4.2010) (with effect in accordance with s. 381(1) of the amending Act) by Taxation (International and Other Provisions) Act 2010 (c. 8), s. 381(1), Sch. 7 para. 67 (with Sch. 9 paras. 1-9, 22)Words in s. 369(3)(e) inserted (with effect in accordance with art. 1(2) of the amending S.I.) by The Finance Act 2009, Sections 101 and 102 (Interest on Late Payments and Repayments), Appointed Days and Consequential Provisions Order 2014 (S.I. 2014/992), arts. 1(1), 8(2)S. 381 applied (1.4.2010) by Income Tax Act 2007 (c. 3), s. 564R(2) (as inserted (with effect in accordance with s. 381(1) of the amending Act) by Taxation (International and Other Provisions) Act 2010 (c. 8), s. 381(1), Sch. 2 para. 19(2) (with Sch. 9 paras. 1-9, 22))S. 380 modified (1.4.2010) by Income Tax Act 2007 (c. 3), s. 564M(2) (as inserted (with effect in accordance with s. 381(1) of the amending Act) by Taxation (International and Other Provisions) Act 2010 (c. 8), s. 381(1), Sch. 2 para. 14(2) (with Sch. 9 paras. 1-9, 22))Words in s. 369(3)(e) inserted (19.7.2011) by Finance Act 2011 (c. 11), s. 69(2)Words in s. 379(2) substituted (1.8.2014) by Co-operative and Community Benefit Societies Act 2014 (c. 14), s. 154, Sch. 4 para. 94(4) (with Sch. 5) (as amended by Finance Act 2014 (c. 26), Sch. 39 paras. 9, 15)Words in s. 369(2) substituted (1.8.2014) by Co-operative and Community Benefit Societies Act 2014 (c. 14), s. 154, Sch. 4 para. 93 (with Sch. 5)S. 380A inserted (with effect in accordance with s. 33(5) of the amending Act) by Finance Act 2009 (c. 10), s. 33(3)S. 378A inserted (with effect in accordance with s. 39(5) of the amending Act) by Finance Act 2009 (c. 10), s. 39(3)