Declaring tax

Interesting OG. Didn't know you could do it that way. Not that it helps me as I got collared for annual tax return about 25 years ago and they've not let me off it since....

To be fair, the current procedures for doing this online mean it is not particularly daunting. But hell, good not to have to do one if you don't need to.

How many punters on p2p don't currently have to do a tax return and choose to not declare the earnings I wonder.  Somehow I think it may be quite a lot, but maybe I'm a cynic.

I can't help thinking OldGrumpy was very lucky to get away with it.  I sent an almost identical letter in the hope that if I offered to pay a one off payment I could get away without a tax return.  No such luck - I've been lumbered with one every year now, and it's never straight forward.  After doing the return online I get a bill which I pay immediately.   Then months later a second, larger bill arrives with no explanation.  This year, because I've got more invested, I'll try querying their figures.   For tax return reasons I am trying to limit the number of P2P platforms I've invested in (oh dear that's a sentence ending in a preposition).  Perhaps different tax offices have different procedures, or perhaps it depends on how much work they've got on - who knows!

For those not in Self-Assessment the letter approach or a phone call will work. I used the phone approach and also told them about benefit in kind. For moderate amounts of undeclared income - perhaps a few hundred Pounds - it's also fine to tell them a few years late and they will be happy to collect the tax and not impose penalties, in my experience. I carried on that way for a few years until I used Bondora. Any amount of foreign interest causes mandatory SA tax returns. As with oldgrumpy my experience was that they'll just adjust your tax code to collect the tax that's due, provided it's below the limit that they can use that for, £3,000.

When completing a tax return you declare the interest in the "Untaxed UK interest etc" entry on the tax return. If you have any foreign interest you include that in the UK total and make a note a the end of the tax return saying how much was foreign until the foreign amount exceeds £2,000. Once it passes that threshold you need to use the foreign pages to declare the foreign income, no longer adding it to UK amount.

The online tax return isn't too bad if you have just P2P and no adjustment letters from HMRC that you have to declare somehow. I found getting those right a bit fiddly. Provided you get your return to them by 30 December they can collect up to £3,000 via PAYE tax code for the next tax year if you want; they give you a check box to select that option. If you have paid too much tax you can give a bank account and in my sample of one they very promptly paid the amount due directly to the bank account. You can choose a cheque refund instead if you prefer.

A bit of hassle but a little UK P2x isn't too painful provided you get things done in plenty of time. Allow a month for the online registration process and learning time the first time, so you don't get rushed. Or more if you can. You can save the online version part way through and add more bits later until it's complete. You can also make it an estimated return with a check box and brief description of what is estimated if it looks as though you might miss the filing deadline. Estimated and in time beats late and penalty. You can revise an estimated return online up to a year after the deadline. Beyond that you have to use paper.

Foreign P2x is more of a pain because you're supposed to use daily exchange rates, though they do accept less frequent if the amount of tax involved is low enough for it not to make much difference. Not too hard to set up a spreadsheet to do the daily calculations, looking up the right exchange rate in a table of those that you've loaded (the ECB provides this data), but more hassle than domestic.

In the past I've used a P810 form to let HMRC know about untaxed interest, gift aid payments etc.

(IANAA, YMMV etc)

Taxable. It is an amount received over and above the repayment of principal on the loan. If you put in 1000 and get 1100 back plus interest then you have income of 100 plus interest

If HMRC sends a letter saying that they are adjusting your tax code to collect tax owed from a previous year the amount of money that they are trying to collect is given in the letter, in a "Tax calculation summary notes" section. That amount of tax owed from past years should be included in the tax return using the "Underpaid tax for earlier tax years included in your tax code for" current year box.

If you choose option 6 View your calculation you will see that part way through there are entries "Income Tax charged" and "Underpaid tax ..." . Those two are added to get the total amount of tax due in the year.