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There are a number of factors which influence whether you will pay tax and if so, how much tax, on interest earnt from Peer to Peer loans. These include:

  • your tax rate
  • your Personal Allowance
  • your Personal Savings Allowance (interest from peer to peer lending is eligible but limits apply. Interest earnt within the IFISA wrapper does not count towards this allowance.)
  • whether your use the IFISA tax wrapper
  • whether there is any relevant bad debt and corresponding tax relief

Tax treatment depends upon your individual circumstances and may be subject to change in future. Interest payments are paid to our Lenders on a gross basis and it is your responsibility to report and pay any tax due.

None of the information provided by FOLK2FOLK is tax advice and you should seek advice from a tax advisor if required.

What are the tax consequences of a default?

In the event of a loan default and if the security property cannot be sold for a sufficient amount to cover costs, interest owed to you and your full investment amount, this could result in a loss for you. Tax relief for this type of loss is available. You would need to seek tax advice to clarify if, and how, you can obtain this tax relief. If your Borrower(s) defaults and the security property cannot be sold for a sufficient amount to cover costs and your whole investment, this could result in a loss for you. Tax relief for this type of loss is available. You would need to seek tax advice to clarify if, and how, you can obtain this tax relief.

Useful links:

* HMRC guidance for individuals investing in peer to peer loans, reporting interest and claiming losses from loans that default.

* HMRC explanation of tax, Personal Allowance and Personal Savings Allowance and a list of types of interest included in the Personal Savings Allowance.



What is your likely actual return from investing in a FOLK2FOLK loan?

Your return is based on the interest rate of the loans in which you are invested but this may be reduced by the following factors:

  • the impact of tax if applicable
  • delayed interest payments
  • defaults – if your Borrower cannot pay interest and/or repay capital (currently we don’t calculate an expected default rate as
    we don’t have enough default data)
  • time in between loan investments when you are not receiving interest
  • selling costs (see our MarketPlace fees) if you want to leave the loan early
  • other costs resulting from Lender changes (see General Terms & Conditions for fees)

If you invest into more than one loan, the interest rates may differ so your overall return will be a combination of interest rates and the above factors.