When should you or your investors declare interest earned?
10:10 AM, 10th December 2015, 10 years ago
4
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I used money lent to me by individuals for property purchases and one of them has decided to leave both the original loan amount and also the interest earned on it with me for another year.
He asked if he needs to declare it in this years tax return as unearned income if he hasn’t actually had the money, or does he declare it when I pay it to him in a later year?
Many thanks
Sue
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Member Since July 2013 - Comments: 1434
1:41 PM, 10th December 2015, About 10 years ago
I believe it is “when it is credited to his/her account”.
That includes “when you calculate the interest earned”, even if you choose to record the result elsewhere.
It is just like the general business rule of “income is accounted for in the tax-year in which it is due, even if it is not actually received until after the end of the tax year”.
Member Since December 2013 - Comments: 13
7:00 PM, 16th December 2015, About 10 years ago
Reply to the comment left by “Michael Barnes” at “10/12/2015 – 13:41“:
so if the original agreement is that interest will be earnt at a rate of * annually but be paid after two years you think they should still declare it in year one?
Member Since July 2013 - Comments: 1434
10:48 PM, 16th December 2015, About 10 years ago
That is too difficult for me.
Ask an accountant or HMRC.
Member Since December 2013 - Comments: 13
12:23 PM, 13th January 2016, About 10 years ago
Reply to the comment left by “Michael Barnes” at “16/12/2015 – 22:48“:
Dear all
My accountant tells me that this should be declared when it is received, so it will be declared in this tax year.
I believe that in the last round of tax changes one can earn up to £1,000 unearned income before paying tax and that is exactly the amount, but I can’t find a refrence to this despite searching the HMRC website for some time, I’d like to pass it on to my investor, does anyone have any details?