peer to peer and tax

Broken_Biscuits

i have very recently started lending with ratesetter. Over the next 30 days i have my first lot of repayments coming in. Just over 20 quid, even less again will be interest.

is there an amount that is too small to declare or will i need to get an online return done last minute that includes all payments up to April 6th?

thanks

Archi_Bald

Tax returns for the FY 2014-15 can be made until 31/01/2016. Self-assessments are very easy to do if you have just a couple of sources of income.

You have to declare all your income but you might reach an agreement with the HMRC that they will collect your tax by adjusting your tax code.

kidmugsy

Does P2P interest count within the up-to-£5k nil rate income tax band available in 2015-16 to people with low incomes?

bowlhead99

kidmugsy wrote: »

Does P2P interest count within the up-to-£5k nil rate income tax band available in 2015-16 to people with low incomes?

I was looking at that the other day and would be interested in the answer to that (not for me but a family member).

Since HMRC started to migrate to the .gov site, everything seems to have been dumbed down to the point of not being useful, so it is hard to get detailed guidance.

As part of their Bulletin & FAQ on starting rate for savings income last year, they said :

What counts as savings income?

This includes interest from savings accounts you hold with banks, building societies and other account providers, such as credit unions. It also includes interest distributions from authorised unit trusts and open-ended investment companies and income which is not interest, such as the profit on government or company bonds which are issued at a discount or repayable at a premium. Other types of savings income include purchased life annuity payments and gains from certain contracts for life insurance

By saying things like "it includes..." and "other types of savings income include..." they were not very explicit about what if any interest-like income it does not include. No doubt there is a guidance manual somewhere somehow for Revenue staff.

Still, if you can include your AUT/ OEIC bond fund distributions there may be some hope. But that excerpt said nothing about private loans to friends or family, loans to companies etc. Although a standard regulated bond fund is lending to UK and overseas businesses and paying the proceeds on as an 'interest payment', it is subject to a variety of rules like withholding at source. Your direct loans to individuals and companies and p2p are outside that set of rules so it is not clear that you can simply take the analogy of it being a type of interest receipt, and that be enough.

They do after all call it a "starting rate for savings income", not a "starting rate for savings and investments interest income" which implies that if you are not 'saving' in a bank or authorised collective investment scheme you may not qualify. I suppose you could experiment by filling out a current tax return form and seeing whether the rules for the box that you would put your P2P income in are fed into the 20% tax or the 'potentially 10%' special rate section

All sorts of high level guidance from HMRC on savings can leave something to be desired if you are doing anything other than the most common things. For example, everyone has heard about the rule where if you fund your kids' savings and they get interest on their bank account over £100 the parent may need to have it taxed as their own. That one is always talked about under childrens' savings but the detailed rules refer to 'investment income' as a catch-all which extends it to e.g. dividend or interest distributions from a bond or equity fund held in bare trust.

You would think that as this £5k limit opens up, if P2P arrangements are classified in that section then individual P2P firms will all start crowing about it in their literature, because tax breaks are an incentive to give them your cash and they are all annoyed they can't currently be held in ISAs at the moment. However, investment and p2p firms are generally very fond of telling you the scantest of overviews of tax rules and recommending in the small print that you check your personal situation with HMRC and/or a tax professional.

Perhaps it will be more obvious and better publicised as we get closer to d-day because most people would want to structure their holdings before the year kicks off, rather than during.

Archi_Bald

kidmugsy wrote: »

Does P2P interest count within the up-to-£5k nil rate income tax band available in 2015-16 to people with low incomes?

I believe the answer is yes. All the P2P providers offer some basic guidance on taxation but safest as alway is to confirm with HMRC.

jamesd

Broken_Biscuits wrote: »

is there an amount that is too small to declare or will i need to get an online return done last minute that includes all payments up to April 6th?

When filling in a tax return amounts are normally roundable down to the next lowest £10, which means that amounts of up to £9.99 are too small to declare. This does not apply to foreign interest, which has to be declared even if it's only a penny.

Unless you already complete a self-assessment tax return you would not be required to complete one for £20 of domestic interest. Instead you'd just send HMRC a letter or phone them and they would adjust your tax code for next year.

gowgowuk

Hello,

I was wondering if someone has experience in asking the HMRC to update the tax code in the PAYE tax to include the (small in my case, les than £200) amount of interest earned with peer-to-peer lending. I wrote to them about a month ago, joining the Zopa and Ratesetter tax certificate, but so far I didn't get any reply (I gave them all my details of course). Should I worry and resend the letter or try to call, or will they change my tax code automatically? Unfortunately, this was not sent as a recorded mail....

Thank you!

badger09

gowgowuk wrote: »

Hello,

I was wondering if someone has experience in asking the HMRC to update the tax code in the PAYE tax to include the (small in my case, les than £200) amount of interest earned with peer-to-peer lending. I wrote to them about a month ago, joining the Zopa and Ratesetter tax certificate, but so far I didn't get any reply (I gave them all my details of course). Should I worry and resend the letter or try to call, or will they change my tax code automatically? Unfortunately, this was not sent as a recorded mail....

Thank you!

I would leave it at least 2 months.

I sent details of my Zopa interest to HMRC on 13th June. My revised code number is dated 28th July but didn't arrive until at least 2 weeks later:(

Have you kept a copy of your letter? I would always advise keeping a copy, then, if necessary, you can simply send them a letter simply saying 'please action this without further delay'

gowgowuk

Thanks. yes I always keep a copy of my letters... I'll leave a little bit longer then!

verybigchris

gowgowuk wrote: »

Hello,

I was wondering if someone has experience in asking the HMRC to update the tax code in the PAYE tax to include the (small in my case, les than £200) amount of interest earned with peer-to-peer lending. I wrote to them about a month ago, joining the Zopa and Ratesetter tax certificate, but so far I didn't get any reply (I gave them all my details of course). Should I worry and resend the letter or try to call, or will they change my tax code automatically? Unfortunately, this was not sent as a recorded mail....

Thank you!

I wrote to HMRC to declare my Ratesetter interest just after the tax year ended, and they still haven't changed my tax code.

patman99

You should treat it as though it is a Bank account and declare the interest earned. They will calculate any Tax owed and let you know how much you owe.