He bought his first house in August last year, initially with funds borrowed from his sister. Raj now believes he is a higher rate taxpayer. He wants to know whether the interest on his sister's money is liable to income tax, and whether he can claim tax relief on the interest he paid his sister on his intial loan. The bad news is that he is unlikely to escape tax on his savings. If, however, it is an interest bearing account you will, by making the deposit, have triggered a taxable source of income.
Interest is taxable on the person whose name appears on the account.
Linnard points out that there could be other issues with the money, because it stemmed from an inheritance. If Raj held the money as an executor or as a bare trust, the tax situation would be quite different. In that case, he would be best to seek professional advice. The mortgage is more straightforward. Mortgage interest tax relief was abolished in April this year, but this does not stop him claiming back the tax relief, which applies to the first 30,000 of a home loan.