cwah
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Post by cwah on May 17, 2019 0:17:05 GMT
Hello
I've been doing P2P loans and earned interests but figured out that it doesn't have the most favourable tax regime.
With interest payment, when you earn above tax free allowance, the tax rate is at 20% standard then 40% at higher bracket.
On the other hand, capital gain has an extra allowance of £12k/year independently of your tax bracket and dividend is at 7.5% standard to 32.5%
So really, if you earn a significant sum in P2P it's much better to receive dividend or capital gain.
So any good platform for that? I know a few but haven't had used them because either it's too high risk (Crowdlord) or too low return (Brickowner)
Any you'd recommend? And that would have 10%+ return/year ideally?
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ilmoro
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'Wondering which of the bu***rs to blame, and watching for pigs on the wing.' - Pink Floyd
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Post by ilmoro on May 17, 2019 1:01:32 GMT
Hello I've been doing P2P loans and earned interests but figured out that it doesn't have the most favourable tax regime. With interest payment, when you earn above tax free allowance, the tax rate is at 20% standard then 40% at higher bracket. On the other hand, capital gain has an extra allowance of £12k/year independently of your tax bracket and dividend is at 7.5% standard to 32.5% So really, if you earn a significant sum in P2P it's much better to receive dividend or capital gain. So any good platform for that? I know a few but haven't had used them because either it's too high risk (Crowdlord) or too low return (Brickowner) Any you'd recommend? And that would have 10%+ return/year ideally? Dividend allowance is £2k after which you pay the rates you have quoted
Not sure there are platforms paying those sort of returns. Uown has one property paying 9% dividend (if available on SM), and has started doing short term developments with predicted returns of 14/15%, nothing currently available though.
Dividend yield on most platforms is max 6.5%, after that you are dependent on housing market for capital return. Brickowner returns are predicted to be more than an average 10% pa (nothing currently available though).
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IFISAcava
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Post by IFISAcava on May 17, 2019 6:28:35 GMT
Hello I've been doing P2P loans and earned interests but figured out that it doesn't have the most favourable tax regime. With interest payment, when you earn above tax free allowance, the tax rate is at 20% standard then 40% at higher bracket. On the other hand, capital gain has an extra allowance of £12k/year independently of your tax bracket and dividend is at 7.5% standard to 32.5% So really, if you earn a significant sum in P2P it's much better to receive dividend or capital gain. So any good platform for that? I know a few but haven't had used them because either it's too high risk (Crowdlord) or too low return (Brickowner) Any you'd recommend? And that would have 10%+ return/year ideally? Which is why I put my P2P investments inside an ISA and keep my stocks and shares outside an ISA.
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Mike
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Post by Mike on May 17, 2019 7:30:29 GMT
Dividends have typically already been taxed at 17-20% so you may not gain anything when you compare like for like
For CGT check crowd2let
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Post by Ace on May 17, 2019 7:56:07 GMT
Property Partner and British Pearl might be worth a look.
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cwah
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Post by cwah on May 17, 2019 10:33:05 GMT
Hello I've been doing P2P loans and earned interests but figured out that it doesn't have the most favourable tax regime. With interest payment, when you earn above tax free allowance, the tax rate is at 20% standard then 40% at higher bracket. On the other hand, capital gain has an extra allowance of £12k/year independently of your tax bracket and dividend is at 7.5% standard to 32.5% So really, if you earn a significant sum in P2P it's much better to receive dividend or capital gain. So any good platform for that? I know a few but haven't had used them because either it's too high risk (Crowdlord) or too low return (Brickowner) Any you'd recommend? And that would have 10%+ return/year ideally? Which is why I put my P2P investments inside an ISA and keep my stocks and shares outside an ISA. I've done the opposite. My ISA is with Vanguard which I know is a safe bet. But for P2P with all these platform issues I don't know any of these where I'd get consistent return. The safest one are around 4-5%. But I buy P2P loans on so many different platform, depending on safety of the loan, which can't be done with ISA
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hazellend
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Post by hazellend on May 17, 2019 21:44:18 GMT
Which is why I put my P2P investments inside an ISA and keep my stocks and shares outside an ISA.
Bad move.
P2P is mere income (and an inconsistent and risky one at that). Stocks and shares provide growth (and can provide reliable income if dividend shares are selected).
Thus, on a total returns basis, your liability risk for CGT is much higher with shares than P2P.
But you do get 12k/year capital gains tax allowance outside of an ISA. It is important to sell and rebuy a bit each year to defuse capital gains. I've been slacking at this myself.
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hazellend
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Post by hazellend on May 17, 2019 22:36:12 GMT
But you do get 12k/year capital gains tax allowance outside of an ISA. It is important to sell and rebuy a bit each year to defuse capital gains. I've been slacking at this myself.
So use the allowance for P2P and "other stuff" and keep the ISA for shares then. Simples.
ISAs are practically designed for buy & hold, growth and compounding. You'd be nuts to use them for anything else other than shares.
Your broker must love you for all the commission you generate on your annual 'diffusion' games. 
Forgot to say that I agree with you lol.
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IFISAcava
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Post by IFISAcava on May 18, 2019 18:25:46 GMT
Which is why I put my P2P investments inside an ISA and keep my stocks and shares outside an ISA.
Bad move.
P2P is mere income (and an inconsistent and risky one at that). Stocks and shares provide growth (and can provide reliable income if dividend shares are selected).
Thus, on a total returns basis, your liability risk for CGT is much higher with shares than P2P. Bad move? 1. My XIRR is higher for P2P than shares over the last few years where I have invested in both. My long term XIRRs for shares (eg 7.93% in my largest S&S ISA with Fidelity over 20 odd years) is only just higher than I am getting from P2P. Most people suggest you should expect about 7% long term from shares, though of course it may be higher or lower for selected periods. 2. If I kept all my shares in an ISA I'd lose a 12k per year tax break. That would be a very bad move. 3. If I end up ever having to pay CGT, it will be at a lower rate (28%) than income tax on P2P interest (45%). 4. P2P income can be reinvested and compounded too. 5. If I had my shares in the ISA and P2P outside I would have been circa £15k worse off last year. (In fact for me it is even worse due to pension AA taper, but that's another issue). As it is I paid no tax on £12k of S&S gains (with minimal broker fees - well under 1%) and no tax on my p2p income. 6. If I get enough accumulated capital such that my stocks and shares allocation is likely to greatly exceed a 12k per year capital appreciation, I can then rebalance and move some back into ISAs. In fact I am already starting this as I am at my max P2P exposure.
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IFISAcava
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Post by IFISAcava on May 18, 2019 18:36:03 GMT
But you do get 12k/year capital gains tax allowance outside of an ISA. It is important to sell and rebuy a bit each year to defuse capital gains. I've been slacking at this myself.
So use the allowance for P2P and "other stuff" and keep the ISA for shares then. Simples.
ISAs are practically designed for buy & hold, growth and compounding. You'd be nuts to use them for anything else other than shares.
Your broker must love you for all the commission you generate on your annual 'diffusion' games.
Who on earth has £12k capital gains from P2P? you must be buying and selling huge amounts (millions probably) on the few SMs allowing discounts/premiums to get anywhere near that. As for "other" - well, if you have a lot of property investments, and you can bank an annual profit from them without huge costs, fine. I don't. Hard to see what else most people are going to use their CGT allowance on under "other".
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IFISAcava
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Post by IFISAcava on May 18, 2019 18:37:19 GMT
Which is why I put my P2P investments inside an ISA and keep my stocks and shares outside an ISA. I've done the opposite. My ISA is with Vanguard which I know is a safe bet. But for P2P with all these platform issues I don't know any of these where I'd get consistent return. The safest one are around 4-5%. But I buy P2P loans on so many different platform, depending on safety of the loan, which can't be done with ISAYes it can. Partial transfers of previous years ISA money to as many P2P ISAs as you want.
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corto
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Post by corto on May 18, 2019 19:50:42 GMT
"2. If I kept all my shares in an ISA I'd lose a 12k per year tax break. That would be a very bad move." I don't get that point. Within an ISA you don't have to pay the tax in the first place. Are you referring to balancing losses?
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IFISAcava
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Post by IFISAcava on May 18, 2019 23:09:02 GMT
"2. If I kept all my shares in an ISA I'd lose a 12k per year tax break. That would be a very bad move." I don't get that point. Within an ISA you don't have to pay the tax in the first place. Are you referring to balancing losses? I'm referring to wasting the tax relief by using an ISA when I'd get that same tax relief outside an ISA
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IFISAcava
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Post by IFISAcava on May 19, 2019 8:13:30 GMT
Who on earth has £12k capital gains from P2P? you must be buying and selling huge amounts (millions probably) on the few SMs allowing discounts/premiums to get anywhere near that
And thus you prove to me that your counter-arguments are not worth listening to.
In your very statement above you have unwittingly supported the statement I was making. 
This is exactly why I'm saying put shares in ISA and leave P2P outside because I suspect the vast majority of P2P gamblers won't even get near £12k capital gains in P2P because P2P is a fixed return (if you get any at all). Hence its a waste putting it in the ISA.
Wow. No further comment.
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littleoldlady
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Running down all platforms due to age
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Post by littleoldlady on May 19, 2019 9:12:03 GMT
Sometimes you just have to smile and move on. Life's too short.
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