When should you or your investors declare interest earned?

by Readers Question

10:10 AM, 10th December 2015
About 3 years ago

When should you or your investors declare interest earned?

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When should you or your investors declare interest earned?

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.interest

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



Comments

Michael Barnes

13:41 PM, 10th December 2015
About 3 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".

Sue Whittle

19:00 PM, 16th December 2015
About 3 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?

Michael Barnes

22:48 PM, 16th December 2015
About 3 years ago

That is too difficult for me.

Ask an accountant or HMRC.

Sue Whittle

12:23 PM, 13th January 2016
About 3 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?


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