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wookash

What tax I should pay on loan interests?

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Hi !

Few months ago I lent money to an investor on fixed percentage. I think this is called a peer-to-peer (?). Now borrowed money was returned together with interests gained. What tax should I pay on gained interest rates? Interests are only £600.

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You'll pay tax only on the money you made on top of the original loan amount.

Now, what tax % you pay is based on your personal circumstances and what tax bracket you are in. If you used a Ltd company then you would pay corporation tax on it.

This is something for your accountant to advise you on!

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19 hours ago, onkar said:

You'll pay tax only on the money you made on top of the original loan amount.

Now, what tax % you pay is based on your personal circumstances and what tax bracket you are in. If you used a Ltd company then you would pay corporation tax on it.

This is something for your accountant to advise you on!

Understood. I was lending money as an individual and I'm in a base tax rate bracket. Should I then pay 20% income tax or is it tax-free due to personal savings allowance?

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You're allowed to earn £1000/year as a standard rate tax payer, £500/year if higher rate without paying any tax. That's across all investments i.e. bank accounts, although not any ISAs you hold. You'd declare it either on a tax return if doing self assessment or you could contact HMRC and advise them of the amount earned if over those limits and they would advise how to resolve (which may be to more to self assessment).

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