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Post by fundingsecure on Nov 7, 2017 8:11:27 GMT
The interest earned is the gross figure of all interest paid to you. When a loan is considered "unrecoverable" it is marked as defaulted - and the total amount of capital is then listed in your "losses". As and when funds are recovered (borrower does pay / item sold at auction / property sold b#via receiver / etc) then the capital amount recovered is listed. In some cases this means losses / recoveries would be in different years. If you are a UK tax-paying resident you can use all losses (on any platform) to offsat total interest earned (again on all platforms). As per the details in the following link - if you do use losses to offset tax, then any recoveries would of course be taxable. The following may help further explain the details: goo.gl/Li81QUFundingSecure |
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blender
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Post by blender on Nov 7, 2017 8:40:50 GMT
Fine, but also recoveries of principal are chargeable to income tax, if those losses have previously been used to offset chargeable interest.
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blender
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Post by blender on Nov 7, 2017 14:10:20 GMT
Wow. My Capital Losses figure and Total Interest Earnt figures are almost the same!! Either Im really bad at picking loans or FS have a lot of defaults! (probably the former) Lucky you! Almost no tax to pay.
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mikes1531
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Post by mikes1531 on Nov 7, 2017 22:09:18 GMT
Wow. My Capital Losses figure and Total Interest Earnt figures are almost the same!! Either Im really bad at picking loans or FS have a lot of defaults! (probably the former) @dllive: That's the result of the way 'losses' are calculated, as explained by FS above. Hopefully, because most FS loans are backed by security, there will be significant recoveries in future years. Even in the case of FS's unmitigated disaster with the wind turbine, something like 30% was recovered and returned to investors.
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mikes1531
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Post by mikes1531 on Nov 7, 2017 22:27:33 GMT
Wow. My Capital Losses figure and Total Interest Earnt figures are almost the same!! Lucky you! Almost no tax to pay. In that case, the investor would pay tax on any future recoveries. So taking the loss on their 2016/17 tax return effectively moves some income from that year into the year when any recovery is made. AFAIK, deferring income generally is considered to be a positive thing for a taxpayer, but that presumes the taxpayers marginal tax rate is not higher in the future than it is in the year of the declared loss. If that's not the case, it's worth remembering that claiming a loss is, AIUI, optional. IIRC, you could decide not to take the loss now, wait until the very overdue loan is resolved completely, and then claim only the actual net loss. This probably is most important for investors who find that claiming all their losses ASAP puts them in a position where they aren't using all of their nil-rate allowances. For them, claiming some of that loss might not save them any tax in the loss year but could cause them to pay more tax in the recovery year. It's obviously a complicated situation, and I'm not qualified to give advice, so if you think this might affect you, I'd suggest discussing this with an accountant/tax advisor/financial advisor.
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blender
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Post by blender on Nov 7, 2017 23:02:27 GMT
Lucky you! Almost no tax to pay. In that case, the investor would pay tax on any future recoveries. So taking the loss on their 2016/17 tax return effectively moves some income from that year into the year when any recovery is made. AFAIK, deferring income generally is considered to be a positive thing for a taxpayer, but that presumes the taxpayers marginal tax rate is not higher in the future than it is in the year of the declared loss. If that's not the case, it's worth remembering that claiming a loss is, AIUI, optional. IIRC, you could decide not to take the loss now, wait until the very overdue loan is resolved completely, and then claim only the actual net loss. This probably is most important for investors who find that claiming all their losses ASAP puts them in a position where they aren't using all of their nil-rate allowances. For them, claiming some of that loss might not save them any tax in the loss year but could cause them to pay more tax in the recovery year. It's obviously a complicated situation, and I'm not qualified to give advice, so if you think this might affect you, I'd suggest discussing this with an accountant/tax advisor/financial advisor. Not sure that your second para is right. True for capital gains tax purposes, but I think that offsetting any loss of principal, against interest for income tax, applies only to the loss in that tax year. Someone will know the answer better than me.
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IFISAcava
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Post by IFISAcava on Nov 8, 2017 7:50:49 GMT
In that case, the investor would pay tax on any future recoveries. So taking the loss on their 2016/17 tax return effectively moves some income from that year into the year when any recovery is made. AFAIK, deferring income generally is considered to be a positive thing for a taxpayer, but that presumes the taxpayers marginal tax rate is not higher in the future than it is in the year of the declared loss. If that's not the case, it's worth remembering that claiming a loss is, AIUI, optional. IIRC, you could decide not to take the loss now, wait until the very overdue loan is resolved completely, and then claim only the actual net loss. This probably is most important for investors who find that claiming all their losses ASAP puts them in a position where they aren't using all of their nil-rate allowances. For them, claiming some of that loss might not save them any tax in the loss year but could cause them to pay more tax in the recovery year. It's obviously a complicated situation, and I'm not qualified to give advice, so if you think this might affect you, I'd suggest discussing this with an accountant/tax advisor/financial advisor. Not sure that your second para is right. True for capital gains tax purposes, but I think that offsetting any loss of principal, against interest for income tax, applies only to the loss in that tax year. Someone will know the answer better than me. But when you decide to write off the principal as a loss is not fixed.
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blender
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Post by blender on Nov 8, 2017 8:43:27 GMT
It's the operator who decides when the principal becomes a loss - for the whole loan in one go. Lenders cannot make that decision, I believe.
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