Budget 2016: Bad debt relief for peer to peer lending

Currently there is no relief available for losses on peer to peer lending. The full amount of interest arising in the year is subject to income tax.

With effect from 6 April 2016, the amount of interest that is subject to corporation tax will be net of bad debts on loans made through authorised P2P platforms that arise in the same year. Bad debts can also be carried forward and set against interest received in future years from eligible P2P loans.

This relief recognises the growth in the P2P sector, giving relief for bad debts against interest received from other P2P lending. The relief is not as generous as sideways loss relief for trading losses, which can in many cases be set against total income.