Do I have to report a UK peer-to-peer lending account on my FBAR?

Usually at least in part. The uninvested cash a UK platform holds for you sits in a segregated client money account at a UK bank under FCA rules, which looks like a reportable foreign financial account. Whether the funded loan participations are themselves an account is genuinely unsettled. Many US persons report the whole relationship because over-reporting on the FBAR carries no tax cost and removes the argument entirely.

Does an Innovative Finance ISA need to be reported to the IRS?

Yes, on the same basis as an unwrapped account. A UK tax wrapper has no effect on US reporting. An innovative finance ISA holds peer-to-peer loans and cash, with loans made from cash held by the ISA manager, so the same two-part structure applies. Interest that is exempt from UK tax inside the ISA remains fully taxable in the United States and reportable on your US return.

Which bank do I name on Form 114 if the platform holds client money elsewhere?

There is no published FinCEN instruction resolving this for loan-based crowdfunding. In practice, name the entity you contracted with and that issues your statements, use its investor reference as the account designation, and record in your working papers that the underlying client money is held in a segregated account at a third-party bank. What matters most is that the basis is documented and applied consistently every year.

How do I work out the maximum value if the platform only shows one portfolio figure?

Download the full transaction history rather than the annual summary and rebuild a running balance from deposits, withdrawals, loan drawdowns, capital repayments and interest credits. The peak often falls immediately after a funding transfer and before deployment. Convert the highest sterling figure using the Treasury reporting rate for the last day of the calendar year, and keep the workings with your records.

Can I claim a US deduction for a UK peer-to-peer loan that defaulted?

Only within tight limits. A nonbusiness bad debt must be totally worthless to be deductible, and it is claimed as a short-term capital loss on Form 8949 subject to the capital loss rules, with a detailed supporting statement. HMRC by contrast gives income tax relief for irrecoverable peer-to-peer loans that can only be set against interest from other peer-to-peer loans. The two reliefs rarely match in amount or timing.

What if I missed several years of FBARs on a UK lending platform?

If the interest was correctly reported on your US returns, file the late reports through FinCEN's BSA E-Filing System and give a reason for filing late. If income was also omitted, the Streamlined Foreign Offshore Procedures require three years of returns and six years of FBARs, with a non-willful certification. The IRS withdrew its separately named delinquent FBAR page in 2026, so treat those two routes as the live ones.

Missed FBAR on a UK Peer-to-Peer Lending Account

A missed FBAR UK peer-to-peer lending account is rarely a simple oversight, because the honest answer to whether the platform holds a reportable account for you depends on the platform's structure rather than on anything it says in its marketing. In the returns we prepare, the position that stands up is this: the uninvested cash the platform holds for you, almost always in a segregated client money account at a UK bank, looks very much like a reportable foreign financial account and should normally be included. The beneficial interest in the individual loan contracts you have funded is a different kind of asset altogether, and whether it is an account at all is genuinely arguable.

That distinction matters more than any general FBAR explainer will tell you, and it is the reason so many US persons in the UK have quietly under-reported. They looked at a screen showing a single portfolio value, decided it was an investment rather than a bank account, and left it off FinCEN Form 114 entirely. The cash leg was reportable the whole time. This article works through the classification properly, explains how to value what you find, sets out the separate Form 8938 analysis, deals with the income tax and loan-loss side, and finishes with how to correct the missed years and how to document a defensible position where the law does not give you a clean answer.

What does the FBAR actually test, and where does a P2P platform sit?

The FBAR is a report of accounts, not of income and not of wealth. A US person must file if they have a financial interest in or signature or other authority over at least one financial account located outside the United States and the aggregate value of those accounts exceeded 10,000 US dollars at any time during the calendar year. The IRS states the position plainly at https://www.irs.gov/businesses/small-businesses-self-employed/report-of-foreign-bank-and-financial-accounts-fbar, and adds a point that catches people out with P2P platforms specifically: whether the account produced taxable income has no effect on whether it is a foreign financial account. A loan book generating nothing, or generating losses, is still tested the same way.

Three elements have to be satisfied together, and a P2P platform stresses each of them differently.

There must be an account. This is the hard element for P2P, because the regulations describe specific categories rather than offering a general definition of any arrangement where a firm holds value for you.
It must be at a financial institution located outside the United States. A UK platform satisfies the location test, but it is worth asking which entity is actually holding the money.
You must have a financial interest in it, or signature or other authority over it. Ownership of record or legal title is the ordinary case, and it usually is not in doubt on a P2P platform.
The 10,000 dollar test is an aggregate test across all your foreign accounts and a maximum value test, not a year-end test. A single day above the line during the year triggers the filing for every reportable account you hold.

The regulatory list of what counts as a financial account is set out at 31 CFR 1010.350(c), reproduced at https://www.law.cornell.edu/cfr/text/31/1010.350. It covers a bank account, meaning a savings deposit, demand deposit, checking or any other account maintained with a person engaged in the business of banking; a securities account, meaning an account with a person engaged in the business of buying, selling, holding or trading stock or other securities; and a residual class of other financial accounts that includes accounts with persons accepting deposits as a financial agency, insurance or annuity policies with cash value, broker or dealer accounts for futures and options, and shares in a mutual fund or similar pooled fund with publicly available shares and regular redemptions. Read that list against what a P2P platform does and you will see immediately why the answer splits in two.

Is the cash on the platform a reportable financial account?

In our view, in most cases, yes. A UK loan-based crowdfunding platform is required to keep lenders' money segregated from its own. The FCA's client money rules at CASS 7.13, published at https://handbook.fca.org.uk/handbook/CASS/7/13.html, require client money to be paid directly into a client bank account, placed with a central bank, a credit institution, a bank authorised in a third country or a qualifying money market fund, and identified separately from any account used to hold the firm's own money. In other words, your uninvested balance is not a notional figure inside the platform's software. It is real money sitting in a real bank account at a real UK bank, held for you, which you can direct and withdraw.

That is very close to the regulatory language about an account maintained with a person engaged in the business of banking, and even closer to the residual category covering a person accepting deposits as a financial agency. The failure mode we see most often is a client who reasons that because the platform is not a bank, none of it is reportable. The platform not being a bank is beside the point when the platform has placed your money with one.

Are the funded loan participations an account, or something else entirely?

Here we will say plainly what most published guidance avoids: this is unsettled, and anyone telling you there is a definitive answer is overstating the position. Once your cash has been deployed, what you hold is a beneficial interest in one or more loan contracts with identified borrowers. That is a debt instrument, or a bundle of them. It is not a deposit, it is not stock or securities held in a brokerage relationship, it is not an insurance or annuity contract, and on most platform structures it is not a pooled fund with publicly available shares and regular redemptions. A discretionary or auto-lend product that spreads your money across a managed pool, with a redemption mechanism, moves noticeably closer to that pooled fund category. A manual lending product where you pick individual loans moves further away.

The practical consequence is that the answer varies by product within the same platform, and sometimes within the same investor's holdings. Two positions are defensible, and they are not equally attractive.

Report the whole platform relationship as one account at its maximum aggregate value. This is the conservative position. It over-reports if the loan interests are not accounts, but over-reporting on an information return carries no tax cost and removes the argument entirely.
Report only the client money cash leg on the FBAR and carry the loan interests on Form 8938 instead. This is the technically cleaner position where the loans are individually selected and there is no redemption mechanism, but it requires the platform statements to separate cash from principal, and it requires you to document why.

What is not defensible is reporting nothing. If the aggregate of your foreign accounts crossed the threshold at any point, the cash leg alone almost certainly needed to be on the form.

Which institution do you name when client money sits at a separate bank?

This is the question nobody writes about, and it is the one that stalls the preparation. FinCEN Form 114 asks for the maximum account value, the type of account, the account number or other designation, and the name and address of the financial institution at which the account is held. On a P2P platform there are two candidate institutions: the platform operator you contracted with, and the ring-fenced bank where the client money actually sits under CASS 7.13. The platform's own statements will show you the former and frequently will not name the latter.

There is no published FinCEN instruction that resolves this cleanly for loan-based crowdfunding. What we do in practice is name the entity with which the investor has the contractual relationship and which issues the statements, use the platform's investor or lender reference as the account designation, and record separately in the working papers that the underlying client money is held at a segregated account with a third-party bank whose identity was or was not disclosed. If the platform does disclose the ring-fenced bank, we say so in the file. The point is not to find the one correct answer. The point is that the form is completed on an identifiable, recorded basis that you apply the same way every year, and that you can explain if asked.

Does an Innovative Finance ISA change the missed FBAR UK peer-to-peer lending account analysis?

No. A UK tax wrapper has no effect on US reporting obligations, and the innovative finance ISA is a wrapper, not a different asset. GOV.UK confirms at https://www.gov.uk/individual-savings-accounts that the innovative finance ISA sits alongside the cash ISA, the stocks and shares ISA and the Lifetime ISA, that the overall ISA allowance is 20,000 pounds for the 2026 to 2027 tax year, and that the holder must generally be resident in the UK. The guidance for ISA managers at https://www.gov.uk/guidance/innovative-finance-isa-investments-for-isa-managers confirms what an IFISA can hold, which includes peer-to-peer loans, crowdfunding debentures and cash, and confirms that loans must be made using cash held by the ISA manager.

That last detail is the useful one. The IFISA does not remove the cash leg, it formalises it. There is cash held by a manager, and there are loans made out of that cash, which is exactly the same two-part structure as an unwrapped account. Wrapping it changes the UK income tax outcome and nothing else. Interest that HMRC treats as exempt inside the wrapper remains fully taxable in the United States, and the account remains testable for FBAR purposes. In our experience the IFISA is the single most common reason a US person in the UK believes, wrongly, that they had nothing to report.

How do you establish maximum value from a blended portfolio figure?

The FBAR reports the maximum value of the account during the calendar year, converted into US dollars. The IRS comparison of the two regimes at https://www.irs.gov/businesses/comparison-of-form-8938-and-fbar-requirements confirms that the FBAR uses the end-of-calendar-year exchange rate, which in practice means the Treasury Reporting Rates of Exchange published by the Bureau of the Fiscal Service at https://fiscal.treasury.gov/reports-statements/treasury-reporting-rates-exchange/ for the last day of the year. Note the mismatch that trips people: you take the highest sterling value reached at any point in the year, then convert it at a single year-end rate. You do not convert at the rate prevailing on the day the balance peaked.

The evidential difficulty is that most platforms present a single blended portfolio value combining uninvested cash, outstanding loan principal and accrued but unpaid interest, and many show only the current figure rather than a daily history. Reconstructing a maximum value from that takes work, and the reconstruction is what the recordkeeping rules expect you to keep. The IRS lists the records to retain, including the name on the account, the account number, the name and address of the foreign bank, the type of account and the maximum value during the year, generally for five years from the due date of the FBAR.

Download the full transaction history rather than the annual summary. Deposits, withdrawals, loan drawdowns, capital repayments and interest credits together let you rebuild a running balance.
Identify the deposit dates. On most investor patterns the peak occurs immediately after a large funding transfer and before the money is deployed, so the maximum cash balance and the maximum blended value often fall on different days.
Where the platform separates cash from invested principal, keep both series. You need the cash series for a cash-only FBAR position and the blended series for a whole-relationship position.
Where the platform genuinely cannot produce a history, use the highest figure the available statements support and record in writing that it is a reasonable estimate on the best data obtainable. A documented estimate is materially better than an omission.
Keep the year-end Treasury rate used for each year with the workings, so the conversion is reproducible years later.

Does Form 8938 catch the loan interests even when the FBAR answer is arguable?

Very often, yes, and this is the second reason the FBAR argument should not be the end of the analysis. Form 8938 is broader. It reaches specified foreign financial assets held for investment that are not held in a financial account at all, including stock or securities issued by a foreign person and financial instruments or contracts with a non-US issuer or counterparty. The IRS question and answer page at https://www.irs.gov/businesses/corporations/basic-questions-and-answers-on-form-8938 sets out the categories. A funded participation in a loan to a UK borrower is, on any ordinary reading, a financial instrument with a non-US counterparty held for investment.

So the position that leaves the loan interests off the FBAR does not leave them unreported. It moves them onto a different form. The thresholds are much higher, and for specified individuals living outside the United States they are more than 200,000 dollars on the last day of the year or more than 300,000 dollars at any time for single filers and those married filing separately, and more than 400,000 dollars or more than 600,000 dollars respectively for a joint return. Those figures are on the IRS comparison page above. Valuation is more forgiving than people expect: fair market value can be determined from periodic statements or publicly available information from reliable financial information sources, and no professional appraisal is required. Filing one form never relieves the obligation to file the other.

How is the income taxed, and where do the UK and US loan-loss rules diverge?

Interest is taxable in the United States as it is credited to you, whether or not you withdraw it. On a P2P platform interest is typically credited to your cash balance and then automatically redeployed into new loans, which means a US person can have a full year of taxable interest income and no cash movement out of the platform at all. That is a common cause of understated Schedule B income running alongside the missed FBAR, and it is why the two problems are usually found together.

HMRC's guidance at https://www.gov.uk/guidance/peer-to-peer-lending confirms that P2P interest is taxable in the same way as any other interest. Where the two systems part company badly is on defaults. HMRC gives relief for irrecoverable P2P loans where there is no reasonable prospect of the loan being repaid, available for loans that became irrecoverable from 6 April 2015, but that relief is ring-fenced: it can only be set against interest received on other P2P loans and cannot be used against salary, pension or other income. The mechanics, including how the relievable amount is measured where the right of recovery has been assigned, are in HMRC's Savings and Investment Manual at https://www.gov.uk/hmrc-internal-manuals/savings-and-investment-manual/saim12110.

The US treats the same default differently. A loan of this kind is a nonbusiness bad debt, and IRS guidance at https://www.irs.gov/taxtopics/tc453 confirms that a nonbusiness bad debt must be totally worthless to be deductible, that partial worthlessness gives nothing, and that the deduction is taken as a short-term capital loss on Form 8949 subject to the capital loss limitations, supported by a separate detailed statement covering the debt, the debtor, the collection efforts made and the reasoning for treating it as worthless. So the same defaulted loan can reduce UK interest income while producing only a restricted US capital loss, and the timing rarely matches either, because a UK tax year runs to 5 April while the US measures everything on the calendar year and the FBAR is a pure calendar-year report.

A worked illustration: three years on a UK platform

The following is an illustration only, using assumed figures, and is not a client matter. Assume a US citizen resident in London funds a UK P2P account with 180,000 pounds in March of year one, of which the platform deploys 150,000 pounds into individual loans within three weeks. Assume for illustration only a year-end conversion rate of 1.25 US dollars to the pound in each year, which is an assumption stated for arithmetic clarity and not a rate to rely on. In year one the peak cash balance is the full 180,000 pounds on the day after funding, which converts to 225,000 dollars, and the peak blended portfolio value is also 180,000 pounds. Under either reporting position the account was well over the threshold and an FBAR was required.

In year two the investor's cash balance never rises above 4,000 pounds because interest is auto-redeployed daily, while the blended portfolio value hovers around 176,000 pounds. If the investor holds no other foreign accounts and takes the cash-only position, the aggregate never reaches 10,000 dollars and no FBAR is due, but the loan interests are still tested for Form 8938. If the investor takes the whole-relationship position, an FBAR is due at roughly 220,000 dollars. Same investor, same platform, opposite outcomes, driven entirely by the classification. In year three the investor also holds a UK current account that peaks at 30,000 pounds, and the aggregation rule brings everything into scope regardless of which position is taken. The lesson we draw for clients is that the cash-only position is only ever safe when the rest of the foreign account picture has been mapped first.

How do you correct the missed years?

There are two live routes, and choosing between them depends on whether the income was reported correctly on the tax returns. Note carefully that the IRS withdrew its separate named page for delinquent FBAR submissions in mid-2026, so any adviser still describing that as a formal programme is working from stale material.

Where the P2P interest was properly reported on your returns and the only failure was the FBAR itself, file the late reports directly through FinCEN's BSA E-Filing System at https://bsaefiling.fincen.gov/. The system requires you to select a reason for filing late, and where the pre-set reasons do not fit you enter your own explanation. Keep a copy of the explanation you gave.
Where income was also omitted, the Streamlined Filing Compliance Procedures are usually the right vehicle. For a US person living in the UK, the Streamlined Foreign Offshore Procedures require three years of delinquent or amended returns and six years of delinquent FBARs, set out at https://www.irs.gov/individuals/international-taxpayers/u-s-taxpayers-residing-outside-the-united-states. The FBARs go through the same BSA E-Filing System, selecting Other as the reason and entering Streamlined Filing Compliance Procedures in the explanation box.
The non-residency requirement for a US citizen or lawful permanent resident is that in one or more of the last three years the individual had no US abode and was physically outside the United States for at least 330 full days. Meeting it matters, because eligible compliant filers are not subject to failure-to-file, failure-to-pay, accuracy-related, information return or FBAR penalties.
Either route requires a certification that the failure was non-willful, which the IRS describes at https://www.irs.gov/individuals/international-taxpayers/streamlined-filing-compliance-procedures as conduct due to negligence, inadvertence or mistake, or conduct resulting from a good faith misunderstanding of the law. A genuine classification difficulty on a novel product is exactly the kind of fact that supports that narrative, provided you can show the reasoning.

On penalties we will not quote figures. The FBAR civil penalty ceilings are inflation-adjusted and change, and a wrong number in a client conversation is worse than none. Structurally, there is a lower tier for non-willful failures and a substantially higher tier for willful ones that is measured against account balances, with criminal exposure in the worst cases. FinCEN's own overview of the reporting requirement sits at https://www.fincen.gov/report-foreign-bank-and-financial-accounts. What determines which tier is in play is almost never the size of the account. It is what the file shows about what you knew and what you did about it.

How do you document a defensible position when the law is genuinely unsettled?

This is the most useful thing we can offer on this topic, because the classification question will not be resolved by waiting. Where a reporting position is arguable, the quality of the contemporaneous file is what converts an aggressive-looking position into a reasonable one. A short position memo written at the time of filing, and refreshed each year, does more work than any amount of retrospective explanation.

State what the platform actually holds, distinguishing the client money balance from the funded loan participations, and attach the platform's own description of its client money arrangements.
State the position taken, in one sentence, and the year from which it was taken.
Set out the regulatory categories in 31 CFR 1010.350(c) that were considered and why the arrangement was or was not thought to fall inside each of them.
Record the maximum value methodology, the data source used, the year-end Treasury rate applied and whether any figure is an estimate.
Record the Form 8938 treatment alongside it, so the two forms are visibly consistent rather than accidentally contradictory.
Apply the same position across every year and every platform. Inconsistency between years, or between two similar platforms in the same return, is the single fact most likely to make a reasonable position look opportunistic.

The practical rule we work to is that where a reporting position costs nothing to take and removes an argument, take it. Including the platform relationship in full on the FBAR has no tax consequence whatsoever. It does not accelerate income, it does not create a liability, and it does not waive anything. The only cost is the effort of establishing the number. Set against the difficulty of defending an omission years later on a product that no published guidance addresses directly, that is a straightforward trade, and it is the one we recommend to most clients who have found a missed FBAR on a UK peer-to-peer lending account and want the exposure closed rather than argued.