Please note
Tax treatment depends on your individual circumstances and may be subject to change in the future. This summary is provided for informational purposes only and relates to the position of a UK resident individual taxpayer. We do not offer advice on tax and if you are in doubt about your own position you should seek professional advice.
Investment return breakdown
Your investment return on Abundance is split into three parts:
Capital repayment - these amounts go towards repaying the amount originally invested i.e. the amount you have lent. Repayments of the amount lent are not subject to income tax.
Investment income (interest or dividend) - is treated as income from a tax perspective and will be taxed according to your income tax band. It should therefore be declared on your tax return when you are required to complete a return. Depending on the type of investment, your investment income is treated as interest or as a dividend which are taxed differently — see below.
Bonus - paid by Abundance rather than the issuing company or council, only applicable to certain investments. Bonuses paid as part of your investment return are treated as interest from a tax perspective.
Types of investment income
Interest
For the majority of the investments on Abundance the investment income is treated as interest from a tax perspective. This is the case for all investment types on Abundance except variable return investments. Interest is taxed in line with income tax, according to your income tax band and should be declared on your tax return.
For some of the investments on Abundance, the company or council issuing the investment is required to deduct a proportion of your interest payments, equivalent to the basic rate of income tax (currently 20%), and pay this to HMRC directly. Please see our Help Centre article on Withholding Tax for more information.
Dividend (variable return debentures)
This is only applicable to a few company investments on Abundance, which have a variable return linked to the performance of the company. In these cases your income will be taxed in the same way as a dividend on a share. This is because the size of your investment income is linked to how the underlying project performs. The dividend tax rate will depend on whether you are a non-taxpayer, basic rate, higher rate or additional rate taxpayer. You may have a dividend tax-free allowance also.
Tax-free allowances
What is the Personal Savings Allowance?
Depending on your income tax band, you may be able to earn some interest tax free. You can find out more here.
What is the Dividend Allowance?
Since the 2016/2017 tax year, you have a tax-free dividend allowance, although the amount has been decreasing. You can find out more here.
Where can I find out how much I have earned on Abundance in a tax year?
If you're completing your tax return, you can find a breakdown of what you have earned on Abundance in a particular tax year.
To view the tax section, click Account in the top right, and then Statements on the pop up menu. Click on the tab for Tax to find a list of PDF statements you can download which summarise what you have earned on Abundance in a particular tax year.
Please note, only investment income you earned in a General portfolio (i.e. taxable) and not an ISA portfolio will show in your statement. If you did not earn any taxable investment income on Abundance in a particular tax year, you won't see the option to download a statement for that year.
What about taxpayers who are not individuals?
The position of companies, partnerships, trusts or unincorporated associations is complex and investors in these categories should get appropriate tax advice on their position. As a general rule, UK companies will pay corporation tax on their investment income and on capital gains.