Failed to declare small amount of P2P earnings. What should I do now?

qwerty1235 · 16 August 2017 at 11:58PM

Hello,

I'm a bit of a muppet when it comes to taxation and I'm trying to understand how to declare my earnings from P2P lending.

Back in late 2015, I was curious about P2P lending and decided to invest around £1,000 across a few platforms, and I made a profit of around £30 in the tax year 2015-2016.

I always knew I had to find out how to pay tax on that income, but I procrastinated so much that I missed the deadline. So now I'm trying to learn what I'm supposed to do but the more I read the more confused I get, in part because things appear to have changed substantially in the previous tax year.

What's the right thing to do now? And what kind of penalties should I expect? Note that I'm a full-time employee and have always paid my taxes through PAYE, so I've never had to do a self-assessment tax return.

Any pointers would be much appreciated!

Bravepants · 17 August 2017 at 12:24AM

I don't think they'll come after you for £6 or £12 (40% tax bracket), the admin costs would be too expensive! It may cost more in staff costs for them to do the paper work on your tax "liability" than you actually owe!

Note that since April 2016 you can earn upto £1000 per year in interest (savings accounts, peer to peer) and not have to pay any tax on it.

For future reference see this:

http://taxaid.org.uk/guides/taxpayers/tax-returns/need-help-completing-your-tax-return

FatherAbraham · 17 August 2017 at 6:56AM

qwerty1235 wrote: »

Hello,

I'm a bit of a muppet when it comes to taxation and I'm trying to understand how to declare my earnings from P2P lending.

Back in late 2015, I was curious about P2P lending and decided to invest around £1,000 across a few platforms, and I made a profit of around £30 in the tax year 2015-2016.

I always knew I had to find out how to pay tax on that income, but I procrastinated so much that I missed the deadline. So now I'm trying to learn what I'm supposed to do but the more I read the more confused I get, in part because things appear to have changed substantially in the previous tax year.

What's the right thing to do now? And what kind of penalties should I expect? Note that I'm a full-time employee and have always paid my taxes through PAYE, so I've never had to do a self-assessment tax return.

Any pointers would be much appreciated!

Write a letter explaining that you received £30 of untaxed income during the tax year in question, and post it to the PAYE-and-Self-Assessment department of HMRC (there's a single national address which you will find at the bottom of this page: https://www.gov.uk/government/organisations/hm-revenue-customs/contact/self-assessment).

This self-reporting is the best way to rectify an error, and will mean you no longer need t worry about the irregulrity of your situation.

Writing a letter means that you can keep a copy as evidence of your acting in good faith.

I don't think you'll be penalised, as long as you tell them before they discover it.

Warmest regards,
FA

surreysaver · 17 August 2017 at 7:53AM

I am also interested in this question going forwards. With the introduction of the PSA, HMRC says taxpayers need to do nothing, as it will be collected through our tax codes. But I'm not convinced that this applies to P2P. I also don't do self-assessments as I'm only PAYE and on 20% tax

Bravepants · 17 August 2017 at 8:30AM

You will get a P60 every year after 5th April. This shows your PAYE tax for the previous year. You will also receive statements of income for the tax liable from P2P platforms and savings accounts. You should send all this "evidence" off with the self-assessment form.

Cheers

surreysaver · 17 August 2017 at 8:49AM

Bravepants wrote: »

You will get a P60 every year after 5th April. This shows your PAYE tax for the previous year. You will also receive statements of income for the tax liable from P2P platforms and savings accounts. You should send all this "evidence" off with the self-assessment form.

Cheers

What if you don't do self-assessments?

Malthusian · 17 August 2017 at 9:36AM

surreysaver wrote: »

What if you don't do self-assessments?

If you have more than £1,000 in P2P and other savings income, then do one.

Joe_Bloggs · 17 August 2017 at 10:45AM

From :-https://www.gov.uk/apply-tax-free-interest-on-savings

Tax on savings interest

If you go over your allowance

You’ll pay tax on any interest over your allowance at your usual rate of Income Tax.
If you’re employed or get a pension, HMRC will change your tax code so you pay the tax automatically.
If you complete a Self Assessment tax return, report the extra interest there.

It is keep doing what you are doing as dar as I can tell.
J_B.

Bravepants · 17 August 2017 at 11:56AM

This is one point I don't understand...how does HMRC know if you go over the limit? I can understand an institution notifying HMRC if the interest they pay you goes over the £1000 limit, but what if you are in say two institutions and they each return say £520 interest in a year, and so in total you have gone over the limit.

Who lets HMRC know so that they can adjust the tax code?

coyrls · 17 August 2017 at 12:14PM

Bravepants wrote: »

This is one point I don't understand...how does HMRC know if you go over the limit? I can understand an institution notifying HMRC if the interest they pay you goes over the £1000 limit, but what if you are in say two institutions and they each return say £520 interest in a year, and so in total you have gone over the limit.

Who lets HMRC know so that they can adjust the tax code?

Both institutions report the interest that they have paid and HMRC add the two together.

bowlhead99 · 17 August 2017 at 12:14PM

HMRC only know if you go over the limit if they receive the information from different people paying you interest and in aggregate it goes over the limit. Not all interest payers have a framework to notify HMRC. For example if I lend you a tenner over the weekend and you give it me back with a pound of interest you are not going to report to HMRC that you paid me a pound. The onus is on the receiver of the interest (i.e. the lender or saver) to declare it, that's what self assessment is all about.

The gov.uk web pages are not full explanations of tax law and are generally simplified for easy readability and comprehension for a majority of readers. By necessity they are dumbed down because going through all the myriad of options makes for very long web pages. That page linked by Joe_Bloggs is a pretty general page on how you're taxed on interest from your savings, which changed when the personal savings allowance came in and banks stopped deducting at source. P2P is mentioned in the context of interest from it counting against your personal savings allowance, but they have other P2P pages elsewhere.

Joe's link is correct that the way most people will pay the tax on their interest is by an adjustment to their tax code (if they're on PAYE) or whenever they pay off amounts owing on their tax return. However, if you want to pay it by having your tax code adjusted and you are not going to do a tax return, you will need to tell HMRC in writing how much you received.

https://www.gov.uk/guidance/peer-to-peer-lending#interest-payments

The interest received from peer to peer loans is taxable in the same way as any other interest received. Interest payments received from peer to peer loans may be paid either with or without deduction of tax. If someone receives interest without deduction of tax, they will need to notify HM Revenue and Customs (HMRC) of the income and to pay the correct amount of tax.

Failed to declare small amount of P2P earnings. What should I do now?

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