How the UK classifies P2P lending income
HM Revenue and Customs treats interest earned from peer-to-peer lending as savings income, equivalent to bank deposit interest or corporate bond coupons. P2P interest is not classified as trading income, dividends, or capital gains (unless you sell a loan note at a profit on a secondary market, which may trigger a capital gain). This classification means P2P interest is added to your total income and taxed at your marginal income tax rate - 20% for basic-rate taxpayers (income GBP 12,571 to GBP 50,270 in 2025/26), 40% for higher-rate (GBP 50,271 to GBP 125,140), and 45% for additional-rate taxpayers above GBP 125,140.
Platforms operating from the European Union - such as Maclear in Switzerland (which pays 14.5-14.9% on SME loans), Mintos in Latvia (which holds a MiFID II licence from Latvijas Banka), or InRento in Lithuania (which operates as an ECSP under the Bank of Lithuania) - pay interest gross to UK investors, meaning no tax is withheld at source by the platform. You receive the full advertised return and are responsible for declaring it to HMRC and paying any tax due.
Personal Savings Allowance: your tax-free buffer
The Personal Savings Allowance (PSA), introduced in April 2016, exempts a portion of your savings income from tax each year. The allowance is GBP 1,000 for basic-rate taxpayers and GBP 500 for higher-rate taxpayers. Additional-rate taxpayers (those earning above GBP 125,140) have no Personal Savings Allowance. P2P lending interest counts toward this allowance alongside bank interest, peer-to-peer loan interest from UK platforms, and interest from corporate bonds held outside an ISA.
If your total savings income for the tax year stays within your PSA, you owe no tax on it and typically do not need to inform HMRC unless you are already filing a self-assessment return for other reasons. Once your P2P interest and other savings income exceed the allowance, the surplus is taxed at your marginal rate. For example, a basic-rate taxpayer earning GBP 1,500 from P2P platforms pays 20% tax on the GBP 500 above the GBP 1,000 allowance, resulting in GBP 100 of tax.
When and how to declare P2P income
You must file a self-assessment tax return (form SA100) if your total untaxed income - including P2P interest, rental income, dividends above the dividend allowance, or self-employment profits - exceeds GBP 1,000 in a tax year, or if you are already registered for self-assessment. P2P interest is reported on the SA100 supplementary pages for savings income. If you earn interest from a UK platform, you declare it under "UK interest"; if the platform is based abroad (most European platforms), you report it under "foreign interest" and may claim a foreign tax credit if the platform's home country withheld tax at source (rare for EU platforms paying UK residents).
The self-assessment deadline for online filing is 31 January following the end of the tax year (which runs 6 April to 5 April). For the 2025/26 tax year, the deadline is 31 January 2027. You must provide the gross interest amount, the platform name, and the country of the platform if foreign. HMRC calculates the tax due based on your total income and any allowances you have used.
Foreign platform reporting
UK tax residents must declare worldwide income, so interest from European platforms is fully taxable in the UK even if the platform is not UK-registered. Platforms registered in Switzerland (Maclear), Latvia (Mintos, Nectaro, Capitalia), Lithuania (InRento, Crowdpear), Estonia (EstateGuru), or Croatia (PeerBerry, Robocash) generally pay interest gross, meaning no foreign withholding tax is deducted. If a platform does withhold tax - for instance, Switzerland applies a 35% withholding tax on some interest payments but offers refund mechanisms for foreign residents - you declare the gross interest on your UK return and claim a foreign tax credit to avoid double taxation. Keep all platform statements showing gross and net amounts.
Can you deduct losses or defaults?
UK tax law's treatment of P2P losses is nuanced and depends on the legal structure of the loan and whether the loss is deemed a capital loss or an irrecoverable loan. HMRC historically allowed relief for irrecoverable peer-to-peer loans under certain conditions: if you can demonstrate that a loan is genuinely irrecoverable (the borrower has defaulted and no recovery is expected), you may be able to offset that loss against your P2P interest income in the same or future tax years. However, this relief is not automatic and the rules are complex.
For example, if a platform such as PeerBerry operates a buyback guarantee and the originator repays your principal even after a borrower default, HMRC may argue no irrecoverable loss has occurred. Conversely, if you invest directly in a loan note without buyback (common on platforms like Mintos or Indemo) and the borrower enters insolvency with zero recovery, that loss may qualify for relief. The exact treatment varies by platform loan structure, whether the loan is treated as a debt instrument or equity, and whether you hold the loan inside or outside an ISA. Consult a UK tax adviser or accountant to determine your eligibility for loss relief and the correct form to claim it (typically via the self-assessment "other income and reliefs" section).
Innovative Finance ISA: the tax shelter
The Innovative Finance ISA (IFISA), introduced in April 2016, is a tax-advantaged wrapper that shelters peer-to-peer lending interest from UK income tax and capital gains tax. You can subscribe up to GBP 20,000 per tax year (2025/26 limit) across all ISA types combined. Interest earned within an IFISA is completely tax-free, and you do not report it on your self-assessment return.
The catch: only UK-regulated platforms can offer IFISA accounts. Platforms authorised by the Financial Conduct Authority (FCA) - such as certain UK-based P2P lenders - provide IFISA wrappers. European platforms operating under ECSP licences from the Bank of Lithuania (InRento, Capitalia), MiFID II licences from Latvijas Banka (Mintos, Nectaro), or Swiss SRO registration (Maclear) are not FCA-authorised and therefore cannot offer IFISA accounts to UK residents. If you invest in these platforms, you receive the interest gross and must declare it as taxable savings income, subject to your Personal Savings Allowance and marginal rate. If you use an IFISA with a UK platform, ensure the platform remains FCA-authorised and operational; if it enters administration, IFISA protection does not guarantee capital return (IFISA is a tax wrapper, not a compensation scheme).
Record-keeping and documentation
HMRC expects you to keep records of all P2P transactions for at least five years after the 31 January filing deadline. Essential documents include:
- Annual or monthly statements from each platform showing gross interest credited, dates, and currency conversions if applicable.
- Confirmation of any withholding tax deducted (rare but possible on Swiss or other non-EU platforms).
- Records of capital invested, loan repayments, defaults, and any secondary-market sales (to calculate capital gains if you sold notes at a profit).
- Platform name, country of registration, and regulator (to support your self-assessment foreign income declaration).
Most platforms provide downloadable CSV or PDF reports. Download these at year-end and file them securely. If you earn interest in a foreign currency (common with platforms like Maclear, which operates in EUR and CHF), convert the interest to GBP using HMRC's published monthly exchange rates for the date the interest was credited, or use the platform's GBP-equivalent figure if the platform provides one.
Common UK P2P tax scenarios
Scenario 1: You are a basic-rate taxpayer earning GBP 800 per year from Mintos and GBP 600 from InRento, totalling GBP 1,400 in P2P interest. Your bank pays GBP 200 in deposit interest. Total savings income: GBP 1,600. Your Personal Savings Allowance is GBP 1,000. Taxable amount: GBP 600, tax due at 20% = GBP 120. You must file self-assessment if this is your only untaxed income above GBP 1,000.
Scenario 2: You are a higher-rate taxpayer with GBP 3,000 in P2P interest from Maclear. Your PSA is GBP 500. Taxable amount: GBP 2,500, tax due at 40% = GBP 1,000. You file SA100, declare the Maclear interest as foreign interest (Switzerland), and pay the tax by the 31 January deadline.
Scenario 3: You hold GBP 15,000 in a UK platform's IFISA, earning GBP 1,200 interest. This income is tax-free and not reported. You also hold GBP 5,000 on Mintos outside an ISA, earning GBP 500. The Mintos interest is taxable but falls within your GBP 1,000 PSA, so no tax is due and no self-assessment is required unless you have other untaxed income.