Is an IFISA worthwhile? | P2P Independent Forum

jevans4949

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Is an IFISA worthwhile? Nov 9, 2017 12:30:33 GMT

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Post by jevans4949 on Nov 9, 2017 12:30:33 GMT

I opened an IFISA with one popular platform earlier this year, but I'm now wondering if I did the right thing.

I am a pensioner, and most of my income is from the State Pension and occupational pensions sufficient to put me into standard tax rates. Bank savings interest is pitifully low, and I only have just over £10k in P2P. So without defaults I am probably within the untaxed savings limit anyway. (We own 2 houses on which we make no income, but that's another story.)

AIUI, you have to calculate your net profit on a platform-by-platform basis, so you should subtract your losses from defaults for each platform. I tried to get information from HMRC on whether you can carry losses over if a platform declares an overall loss on your account, but got no call-back, but that's another issue.

With an IFISA, if there is no tax on your income, there is nothing against which to set any losses due to defaults.

So, as I see it, there is no point in a P2P IFISA until your net income from savings including ordinary P2P get over the untaxed income bracket.

Am I wrong?

misscas
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Is an IFISA worthwhile? Nov 9, 2017 13:04:50 GMT

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Post by misscas on Nov 9, 2017 13:04:50 GMT

Nov 9, 2017 12:30:33 GMT jevans4949 said:

... With an IFISA, if there is no tax on your income, there is nothing against which to set any losses due to defaults.

So, as I see it, there is no point in a P2P IFISA until your net income from savings including ordinary P2P get over the untaxed income bracket.

That thought had occurred to me. I await more informed opinion with interest.

littleoldlady
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Running down all platforms due to age

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Is an IFISA worthwhile? Nov 9, 2017 13:08:58 GMT

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Post by littleoldlady on Nov 9, 2017 13:08:58 GMT

AIUI you get taxed on the net proceeds across all platforms, so if you made a profit of £1000 on one and a loss of £500 on another your taxable element would be £500. However if you made a net loss aggregating all platforms then this could not be offset against income the following year. That is a difference between Income and capital Gain tax. You are as a standard rate payer allowed £1000 of interest and p2p tax free.

There is also an allowance of up to £5000 which is reduced by £1 for every £1 that your non-savings income (including p2p) exceeds the personal allowance. www.gov.uk/apply-tax-free-interest-on-savings.

Even if there is no tax saving in an IFISA there is no disadvantage (unless you wanted to use the allowance for something else) and it saves the tax reporting hassle.

All just my personal opinion, rely on professional advice etc blah blah.

Last Edit: Nov 9, 2017 13:12:20 GMT by littleoldlady

All my posts are my personal opinion and are not advice. History suggests that, if anything, it would be more profitable to do the opposite of whatever I do, but whatever you do will not be any responsibility of mine.

marka
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Is an IFISA worthwhile? Nov 9, 2017 18:09:25 GMT

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Post by marka on Nov 9, 2017 18:09:25 GMT

My understanding (which may well be wrong ) is that losses from one platform can be offset against another as long as it is outside of an an ISA, so for example...

Assuming no other interest income, a basic rate allowance of £1000, and £1000 gain across 3 platforms...

Platform A interest gain of £750
Platform B interest gain of £750
Platform C loss of £500
No tax to pay (750+750-500 = 1000 so within allowance)

Platform A interest gain of £750
Platform B (IFISA) interest gain of £750
Platform C loss of £500
No tax to pay (750-500 = 250 so within allowance)

Platform A interest gain of £750
Platform B interest gain of £750
Platform C (IFISA) loss of £500
20% to pay on £500 (750+750 = 1500-allowance = £500)

Last Edit: Nov 9, 2017 18:10:06 GMT by marka

ilmoro
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Is an IFISA worthwhile? Nov 9, 2017 19:14:21 GMT martinde21 likes this

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Post by ilmoro on Nov 9, 2017 19:14:21 GMT

Yes. AIUI Losses are applied to the specific platform first then any surplus to P2P income as a whole but not any non-P2P interest. Note relief cannot be claimed on SM purchases made after a loan became eligible for relief. So technically any loans on Lendy for example where a receiver/administrator has been appointed would not qualify if purchased after the date of the appointment. One of the reasons why loans are being suspended before a Lendy defined default.

www.gov.uk/guidance/peer-to-peer-lending

www.gov.uk/government/uploads/system/uploads/attachment_data/file/597959/Income_tax_relief_for_irrecoverable_peer_to_peer_loans_FINAL_GUIDANCE__2_.pdf

Last Edit: Nov 9, 2017 19:16:41 GMT by ilmoro

Minor shareholder in AC, BO, FO, CP, WA, Pfi, Ccube, Sdrs, AE, ABL. AC beta test. LAG, MTAG, FSAG

PLEASE NOTE : All opinions and observations made on this forum are my own view and made in a personal capacity. I have no links to any platform nor am I a financial professional so posts should not be considered financial advice or promotion. I accept no responsibility or liability for the accuracy, content, completeness, legality, or reliability of the information contained in my posts.

p2pmark
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Is an IFISA worthwhile? Nov 9, 2017 19:20:55 GMT

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Post by p2pmark on Nov 9, 2017 19:20:55 GMT

I guess it may be worth it, even if under the limit if (a) you think you may go over the tax free limit in future years, or (b) you think the tax rules might change in future. In both cases having an IFISA set up hopefully provides some protection. (Although I suppose it's possible IFISA rules may also change.)