Borrowing to invest: the risks, and the tax that makes it harder

Borrowing magnifies gains and losses. In Ireland the interest gets no tax relief against the gain, so investments must beat the loan rate by a wide margin.

You can borrow to invest through a loan, a margin account or a product with leverage built in. Either way, the gains and losses are worked out on more money than you put in. If the investment earns more than the loan costs, you gain. If it doesn't, you lose, and you can lose more than you started with.

The tax works against you

• No relief for the interest. In working out a capital gain, “no payment of interest shall be allowable” (section 552). Exit tax on a fund is charged on the gain over what you paid, again with nothing off for borrowing costs.
• Tax on the whole gain. You pay tax on the gain on the borrowed money too: 31% Capital Gains Tax, or exit tax of 38% in 2026 and 35% from 2027 once Finance (No. 2) Bill 2026 is enacted. The interest comes out of your pocket in full.
• Fund losses are wasted. A loss on an exchange-traded fund (ETF) can't be set against other gains. So a leveraged loss on a fund gets no tax relief at all.

Doubling up: what you keep

Take €10,000 of your own money and borrow the same again at 7%, with interest added to the loan. Then sell after 10 years and repay it. Returns are steady each year, which real markets never are:

At 7% interest, borrowing to buy the ETF leaves you worse off even at 10% a year. That is because the extra gain is taxed and the interest isn't relieved. With shares, it only starts to pay at 10% a year. If the investment falls 5% a year, the borrower ends €8,121.85 in debt after selling, having lost the whole €10,000.

Margin calls

A lender secured on your investments will ask for more money, or sell them, if your share of the holding falls below an agreed level. In the falling case above, equity drops below 25% of the holding in 2029. A forced sale at a low point turns a fall you might have waited out into a permanent loss.

Before you borrow

• Compare the after-tax return you expect with the loan rate, not the headline return.
• Check what happens if markets fall 30% in the first year, not what happens on average.
• Leveraged ETFs reset their borrowing each day, so over months their return can differ a lot from a multiple of the market's.

To test your own amount, leverage, loan rate and returns, use the borrowing to invest simulator.

Work it out

• Borrowing to invest: what it does to your returns →
• Savings account, ETF or shares? →

Sources

• Irish Statute Book: Taxes Consolidation Act 1997, s.552(3)(b): no payment of interest is allowable in computing a gain (individuals) (checked 16/10/2026)
• Revenue: Tax and Duty Manual Part 27-04-01: offshore funds in the EU, EEA and OECD (38% rate, 8-year deemed disposal, no loss relief, no USC or PRSI) (checked 25/10/2026)
• Department of Finance: Statement by the Minister for Finance on Budget 2027: fund and life assurance exit tax 38% to 35% from 1 January 2027 (checked 25/10/2026)
• Revenue: How to calculate CGT (checked 25/10/2026)
• Revenue: eBrief No. 142/26: CGT standard rate reduced to 31% from 7 October 2026 (checked 25/10/2026)

General information, not tax advice. HeyPenny is not a tax agent.