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Post by dan1 on Dec 4, 2017 10:57:31 GMT
Correct me if i'm wrong, but you get £11K+ capital gains allowance a year, with a bit of switching around holdings, you can realise that £11K gain every year, tax free. ... which is roughly 2% of a £500k portfolio or 1% of a £1m portfolio, both entirely feasible to achieve over 25 years of prudent stock-market investing. and don't underestimate the pain of record keeping and completing tax returns, you'll know what I mean if you've ever held accumulation funds outside of a tax wrapper. You also need to remember that capital gains are not always within your control - share capital distributions, for example.
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aj
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Post by aj on Dec 4, 2017 11:34:05 GMT
Correct me if i'm wrong, but you get £11K+ capital gains allowance a year, with a bit of switching around holdings, you can realise that £11K gain every year, tax free. ... which is roughly 2% of a £500k portfolio or 1% of a £1m portfolio, both entirely feasible to achieve over 25 years of prudent stock-market investing. Different problems to have! With a fully utilised capital gains and ISA allowance, assuming no mortgage left, any Spouses allowances used up too. I'd be fully utilising the pension allowance (40K/Year) until I decided I could retire. With a 500K portfolio i'm not sure that timescale would be very long!
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SteveT
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Post by SteveT on Dec 4, 2017 11:39:18 GMT
... which is roughly 2% of a £500k portfolio or 1% of a £1m portfolio, both entirely feasible to achieve over 25 years of prudent stock-market investing. Different problems to have! With a fully utilised capital gains and ISA allowance, assuming no mortgage left, any Spouses allowances used up too. I'd be fully utilising the pension allowance (40K/Year) until I decided I could retire. With a 500K portfolio i'm not sure that timescale would be very long! Sadly, the annual pensions allowance is of limited further use once you’re up against the Lifetime Allowance.
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IFISAcava
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Post by IFISAcava on Dec 4, 2017 12:37:31 GMT
not for 40/45% tax payers. A 0.5% discount equates to about 1.5% annual which is much less than 40/45% of the 12/13% return. I guess it depends on the annual rate, the maturity and when you sell. If you are forced to sell a 6 months 8% loan after 3 months at 1% discount you will make a loss. Admittedly it's a bit of an extreme scenario but there is also a time to maturity limit beyond which you can no longer sell your loans. So unless you are closely micromanaging potentially thousands of loans you are bound to be stuck with quite a few and be liable for income tax. I am also a higher rate tax payer but this strategy never seemed worth the micromanagement and paperwork required especially if you have to do self-assessment. indeed - wouldn't work at that level - but there aren't any of those on FS! A realistic scenario with minimal micromanagement is 0.5-0.6% discount after 4 months - they sell quickly (at the moment - we all know liquidity can change quickly). So that's a 1.5-1.8% pa discount on an average 12.5% loan - that's 10.7-11% tax free. The occasional one may slip through unsold, so round down to 10.5%. I'll take that. The alternative strategy for the IFISA is to buy the discounted loans, aim for 15-16% APR equivalent, and hope even after the increased risk of defaults you are ahead. I tried that first, but had several defaults so went for plan B outside of IFISA.
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Post by robberbaron on Dec 4, 2017 13:18:08 GMT
A realistic scenario with minimal micromanagement is 0.5-0.6% discount after 4 months - they sell quickly (at the moment - we all know liquidity can change quickly). So that's a 1.5-1.8% pa discount on an average 12.5% loan - that's 10.7-11% tax free. The occasional one may slip through unsold, so round down to 10.5%. I'll take that. Fair enough, but what about the paperwork? Don't you have to record and report hundreds of small capital gains to HMRC every year?
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IFISAcava
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Post by IFISAcava on Dec 4, 2017 15:13:54 GMT
A realistic scenario with minimal micromanagement is 0.5-0.6% discount after 4 months - they sell quickly (at the moment - we all know liquidity can change quickly). So that's a 1.5-1.8% pa discount on an average 12.5% loan - that's 10.7-11% tax free. The occasional one may slip through unsold, so round down to 10.5%. I'll take that. Fair enough, but what about the paperwork? Don't you have to record and report hundreds of small capital gains to HMRC every year? no - FS gives you a total for the net gain on the SM. And you don't need to report capital gains unless you owe them something (or sell 4 times capital gains threshold or something like that - not sure as I've never got there).
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Post by celticelvis on Dec 12, 2017 13:27:37 GMT
You can only open one IFISA a year with new money. You can open others and transfer in funds from existing ISAs. Indeed. I have 15... Why don't you just have it all in one IF ISA?
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pom
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Post by pom on Dec 12, 2017 14:43:45 GMT
Why don't you just have it all in one IF ISA? Diversity, tho personally I'd say 15 is a little extreme unless you have a LOT of previous years ISA cash to spread around.
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IFISAcava
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Post by IFISAcava on Dec 12, 2017 15:10:36 GMT
Why don't you just have it all in one IF ISA? Diversity, tho personally I'd say 15 is a little extreme unless you have a LOT of previous years ISA cash to spread around. Ranges between 5 and 55K per platform, average is 20K per platform. 25 years of PEP/ISA accumulation! Current return around 9% before defaults, 8.5% after estimated write offs (equivalent to 15.5% pre tax @ 45%).
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Post by celticelvis on Dec 12, 2017 16:02:54 GMT
Diversity, tho personally I'd say 15 is a little extreme unless you have a LOT of previous years ISA cash to spread around. Ranges between 5 and 55K per platform, average is 20K per platform. 25 years of PEP/ISA accumulation! Current return around 9% before defaults, 8.5% after estimated write offs (equivalent to 15.5% pre tax @ 45%). So what is the benefit of this rather than having it all in one ISA? Are you not losing money by not having it all in the highest interest ISA?
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ozboy
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Post by ozboy on Dec 12, 2017 16:11:56 GMT
And what if that one, highest interest IFISA Platform (Egg Basket) goes bust, or you have a string of "bad" defaults and lose loadsa capital, and .........
It has been mentioned, Diversification (to reduce Risk), which always has a "Cost" for the relative "Safety", usually nominally lower Returns/Interest in the "lesser" investments in the diversified investment risk spread.
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Post by celticelvis on Dec 12, 2017 16:17:08 GMT
Fair point , but by having multiples are you not increasing your chances that one will go bust?
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ozboy
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Post by ozboy on Dec 12, 2017 16:23:40 GMT
Yes, you are, which is one of the risks of risk diversification! As well as a brain hurting conundrum.  Pah, investing, easy isn't it!!!  |
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Post by celticelvis on Dec 12, 2017 16:28:47 GMT
Yes, you are, which is one of the risks of risk diversification! As well as a brain hurting conundrum. Pah, investing, easy isn't it!!! Thanks Ozboy, I appreciate the replies 
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IFISAcava
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Post by IFISAcava on Dec 12, 2017 16:48:38 GMT
Fair point , but by having multiples are you not increasing your chances that one will go bust? Several issues: 1. I don't want more than 1% in any one loan. Some platforms have a minimum £5000 per loan, so I am already breaking that rule (though I am pretty close if non-IFISAs P2P included too). In order to get enough decent loans I need more than one platform. 2. Using one platform is essentially a gamble. If let's say 1 in 10 platforms will go bust, you have a 1 in 10 chance of your single platform going bust and losing everything and a 9 in 10 chance of losing nothing. If I use 10 platforms I would expect one to go bust so I will likely keep 90% of my capital, maybe 80% if I am unlucky, 100% if I am very lucky. That's diversification (be it platform risk or loan default) - I get closer to the average return (90%), and further away from an above average (100%) or below average (0%) return. So, to answer your question - are you not increasing your chances that one will go bust? - yes, I am, but I am also greatly reducing my chances of losing a large percentage of capital, at the cost of getting just an average rather than a possible above average return. 3. Platforms specialise, so by using more than one I can get: different types of property loans - residential BTL, bridge, commercial, development; asset-backed loans (planes, trains, automobiles and various types of stuff); business loans; green energy loans etc etc. Maybe if just using one platform there is too high a risk that one of those areas is most hit by the developing post-Brexit economic slump. I may not stick with 15 - we will see how it all goes. The bigger platforms due to launch will help.
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