PEER-TO-PEER investors were among the self-assessed taxpayers sent interest ‘nudge’ letters by HMRC over Christmas, Peer-to-Peer Finance News understands.
The government’s tax department sent out 10,000 letters to people over the holiday period, asking them to “reconsider” the amount of interest they had declared on their investments in their 2014-15 tax return. It warned them that they could be charged a penalty if they were found to have filled out their tax return incorrectly.
HMRC receives interest data from banks and other financial institutions, including P2P lenders, which it then cross-references with its tax return data to identify people who have not declared enough interest.
It is unclear exactly how many P2P investors were sent letters, but it is thought that more than half a dozen P2P platforms provided HMRC with information.
An HMRC spokesperson said: “We have written to 10,000 customers who appear to have under-declared untaxed interest to encourage them to get their tax affairs up to date and get things right from now on. We are offering help and support to do that.”
It is the responsibility of P2P investors to declare and pay tax on interest earned.
If a P2P loan defaults, the investor can set the loss against the interest they receive on other P2P loans before the income is taxed.
The Innovative Finance ISA will reduce the tax burden for many investors. The tax-free wrapper around P2P investments means that people can earn tax-free returns up to the value of their individual ISA allowance each year (£15,240 for 2016/17).
Landbay and Lending Works are fully authorised by the Financial Conduct Authority, paving the way for the launch of their IFISA products, as well as a number of smaller platforms. The ‘big three’ – Zopa, Funding Circle and RateSetter – are still awaiting FCA approval.