Loan to family member and repayment

retiredbanker1 · 16 October at 11:39AM

jtk174 said:

XRS200 said:

jtk174 said:

Thanks so much for all your replies and warnings. I appreciate that there is a risk and I guess time will tell.
One of the thoughts that flicked through my head was that if/when I get payments back into my bank account, is this going to be seen as earnings that get reported to HMRC and I end up paying tax on it! ?
I'm not charging interest so won't be making a profit and will obviously be losing money over the period.
I'm a pensioner and was shocked this year when I started to pay tax on the savings, I'm now lending!
Any thoughts on what's best to do with the repayments?

You only pay tax on the savings interest, not on the savings.

I think you are closest to what I'm trying to find out. I don't understand what relationship the Banks have with the tax system and is someone paying back a loan, without interest, classed as earnings?
If money being repayed into my account was to be seen as "earnings" and I was taxed as a result, then I'd actually be being penalised.

The Banks report interest over a certain limit to HMRC - nothing more nothing less.
If your bank asked you to explain where the credits are coming from; if you have a signed agreement, show them this.
Probably you are over thinking this?

XRS200 · 16 October at 11:42AM

You misunderstand what I was saying.

You said you are lending because you pay tax on savings. You don't pay tax on savings. You pay tax on interest earned, depending on amount.

You don't pay tax on loan repayments made to you.

enthusiasticsaver · 17 October at 4:33PM

Banks do not report income coming into your account but they do report on interest earned. So any repayments your family makes will not be disclosed to HMRC. I would also echo others in that family and friend loans often end up being an issue so make sure if you are lending to someone that they can afford to pay you back and in fact you trust them to do so. If they are not going for a commercial loan or credit card that would normally indicate a bad credit record so I would only lend money you are prepared to lose.