What is accrued interest?

Under our loan agreements interest arises daily. Until that interest is paid by the borrower it is treated as accrued interest and belongs to the current owner of the loan. When a loan part is sold, the price paid by the buyer includes any accrued interest due to the seller at the date of sale. For most UK taxpayers, the accrued interest as at the sale date forms part of the seller’s taxable income. When the borrower pays the interest, the buyer receives a credit, so that they are not taxed on the same income as the seller.