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TonyTax, Tax Consultant
Category: Tax
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Experience:  Inc Tax, CGT, Corp Tax, IHT, VAT.
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I am retired and live in Malaysia. I left the UK in 1973 and have not worked there sin

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Hi, I am retired and live in Malaysia. I left the UK in 1973 and have not worked there since. I am considering making a loan of 300k to a relative in the UK. How much tax should be withheld on the interest? Do I need to formalise the deal with a loan agreement?
David Newman
Submitted: 1 year ago.
Category: Tax
Expert:  TonyTax replied 1 year ago.

There are some notes on tax deduction from loan interest here. Whilst they look to deal with Peer To Peer Lending through intermediaries, they explain the rules for tax deduction from interest generally (paragraph 10).

As you would be an overseas lender, your borrower should deduct tax from the interest at the rate of 20%. Given the size of the loan, if I were the lender, I would have a loan agreement drawn up.

I hope this helps but let me know if you have any further questions.
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