Main provisions can be found in Income Tax Act 2007 section 874 (2)
Any interest paid needs TDS (tax deducted at source).
Rate of deduction – Basic rate : presently 20%
Corporate exemption – If interest paid to a UK tax resident company. No TDS required.
DTAA: Where DTAA exemption exists. HMRC prior permission required to pay gross.
Main guidance: HMRC Manual: CTM35000
Contains detailed provisions for deducting tax and depositing it with HMRC
Source of legislation: Income Tax Act 2007: Section 874
Form to be submitted: CT61
I checked if this interest can be covered under the new savings allowance.
Interest from Peer to Peer lending is included under the new savings allowance but the lending should have been originated via an “operator” registered to carry on regulated activities.
Source: Section 888E Sub section 4 part d.
Simplest is to avoid interest altogether.