Do I have to pay tax on the money I earn by lending?
Updated 6 months ago
All returns are paid without any tax - even basic rate - deducted, so you should declare your gains to the HMRC. At the end of the tax year we'll make an annual income statement available to you to download from your account showing the total gross interest you've received over the previous 12 months. Find out how to declare your Zopa earnings.
Zopa provides an annual statement to make it simple to declare your earnings to the HMRC for tax purposes. In June 2016 we updated our tax statements to reflect changes to HMRC’s guidelines regarding tax relief for bad debt:
From tax year 2015/16 bad debt can be offset against interest income. Repayments on defaulted loans should be treated as taxable income (where they were previously eligible for tax relief). The amount of income tax you pay is dependent on your individual circumstances and may be subject to change in the future.
The Personal Savings Allowance (PSA) was introduced for the 2016/17 tax year onwards and allows lower bracket tax-payers to earn up to £1,000 per year (£500 for higher earners) in savings income tax free. Your peer-to-peer (P2P) earnings are covered by your PSA, which means you can already benefit from tax-free earnings with Zopa (and / or any other P2P platforms you may use).
From 2016/17 tax year all peer to peer lending companies with full FCA permissions will be able to offer an Innovative Finance ISA. This will allow lenders to invest up to £20,000 a year (annual allowance for the 217/18 tax year) in a P2P platform tax free. Read more about our Innovative Finance ISA.
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