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Where Taxpayers and Advisers Meet

Interest on tax return

Brightonian
Posts: 112
Joined: Wed Aug 06, 2008 3:31 pm

Interest on tax return

Postby Brightonian » Wed May 24, 2017 2:14 pm

Can anyone tell me where interest earned on a personal loan should go on the tax return please? If I make a loan to a family member and they pay me interest, does it go in the section for bank and building society interest or on the additional information section for interest from gilts. I used to put it in the other income section but that won't qualify for the savings allowance. Any ideas?

MichCat
Posts: 39
Joined: Sat Dec 10, 2016 5:01 pm

Re: Interest on tax return

Postby MichCat » Thu May 25, 2017 9:28 pm

Interest on a loan is not savings interest, so it does not qualify:

https://www.gov.uk/government/publicati ... -allowance

Brightonian
Posts: 112
Joined: Wed Aug 06, 2008 3:31 pm

Re: Interest on tax return

Postby Brightonian » Fri May 26, 2017 2:37 pm

Thank you. It just never occurred to me, but of course it must be the case. I'll check out the link you have given. Peer to peer lending seems to go on the AI pages, so that must count.

Brightonian
Posts: 112
Joined: Wed Aug 06, 2008 3:31 pm

Re: Interest on tax return

Postby Brightonian » Wed May 31, 2017 9:45 am

I have just spoken to HMRC and they say personal loan interest DOES count for the PSA. I am a little reluctant to take them at their word but. . . .

maths
Posts: 8033
Joined: Wed Aug 06, 2008 3:25 pm

Re: Interest on tax return

Postby maths » Wed May 31, 2017 8:14 pm

There is no reason why the interest to which you refer should not qualify for the individual savings allowance (commonly referred to as a personal savings allowance).

The reference provided by MichCat but is interesting but incomplete.

"Savings income" for this purpose includes "interest"; the latter term is not specifically defined in the legislation. It is usually defined as payment for the time use of money.

Interest on a personal loan qualifies. However, HMRC would in all probability be sceptical of whether as between the members of the family a loan actually exists. Thus, it would be necessary for the loan to be in written form and should contain all the terms which would be contained in a loan between third parties (eg repayment terms; interest rate; security; default terms etc). A third party witness signing would help.

As to entry on the Tax Return I would suggest including it in Boxes 1 or 2 "Income and Dividends etc" and explain the nature of the interest in the Additional Info' box.

JRG
Posts: 419
Joined: Wed Feb 03, 2010 4:40 pm

Re: Interest on tax return

Postby JRG » Thu Jun 01, 2017 9:25 am

To my mind, unless there is a formal, written loan agreement, then giving money to a relative can be considered a gift, as can the repayment(s) and any extra payment(s).
As gifts are not considered to be income by HMRC, they incur no liability for tax, nor do they need to be reported to HMRC.

Brightonian
Posts: 112
Joined: Wed Aug 06, 2008 3:31 pm

Re: Interest on tax return

Postby Brightonian » Thu Jun 01, 2017 9:32 am

Thank you to everyone who has taken the time to reply. Your responses have been extremely helpful and I am very grateful. In tax, I often find that it's the apparently simple stuff that is the most difficult!


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