Your Personal Savings Allowance (PSA)
Introduced in 2016/17, the PSA gives all tax-payers a tax-free savings allowance. If you're a basic rate tax-payer, you can earn up to £1,000 per year tax-free. Higher earners can earn up to £500 per year.
Your Zopa earnings from peer-to-peer investments may be covered by your PSA.
Declaring your Zopa earnings to HMRC
We don't deduct tax from the interest you earn through Zopa – so you must declare your earnings to HMRC.
Interest and 'refer a friend' bonuses are all taxable. Cash back isn't typically considered taxable.
The figures you need to give to HMRC are in your annual income statement. Your latest statement will appear on your Statements page just after the start of the new tax year.
And just in case you were wondering, HMRC doesn't let you offset fees for selling loans against income from a loan. HMRC's full guidance on declaring your earnings.
IFISA: Tax-free earnings
With the Zopa Innovative Finance ISA (IFISA), you can enjoy the usual competitive interest we offer – and not pay tax on your earnings too!
You can invest up to your annual tax-free allowance each year AND you can transfer-in ISAs from previous years. Your money will earn interest tax-free, always at the latest market rates, for as long as it stays in your IFISA.
Tax treatment depends on individual circumstances and may be subject to change in the future.
Make the most of your ISA allowance
Each year you get a tax-free allowance. For the 2019/2020 tax year it's £20,000.
You can have a Lifetime ISA, open one Cash ISA, one Stocks and Shares ISA and one Innovative Finance ISA (IFISA) in any tax year. You can then split your annual tax-free allowance across them or just choose to invest in one or two of the different types of ISA. HMRC's full guidance on Individual Savings Accounts (ISAS).
Important: It's your responsibility to make sure you don't invest more than your allowance across the three types of ISA each year.
You don't have to wait for April to roll around to move an existing ISA. If you've seen a better deal, you can transfer your ISA at any time — just check with your current ISA provider first in case there are any penalties for transferring-out.