Post by hazellend on Sept 6, 2018 7:29:43 GMT
Important for investors to see how P2P returns can be massively different between individuals due to some unique tax breaks.
ALWAYS THINK OF NET RETURNS
Here are some examples using 140k invested for reasons seen below
1) no earned income. Has 140k invested in P2P at 12%
16.8k/ year net return (after using personal allowance, starting rate for savings, personal savings allowance)
This would apply to a married couple with high net worth where one individual is a high earner and the other has no earned income.
2) higher rate tax payer (let’s call it 40% for simplicity sake although rates may vary (40,60,45)
140k invested will give around 10k net return (no savings allowances.
Could be much worse if earned income around 100k due to 60% tax cliff 100-122k
3) P2P isa, too risky in my opinion, can cut savings income but lose tax relief on losses which can hugely benefit example 1 as P2P investments grow. Also, due to ISA limit of 20k per year would need to invest small amounts in each loan to stay suitably diversified.
In summary P2P investing is most attractive to example 1.
I’ve started this thread to discuss how to maximise P2P income through tax efficiency for those with significant assets invested > 100k.
ALWAYS THINK OF NET RETURNS
Here are some examples using 140k invested for reasons seen below
1) no earned income. Has 140k invested in P2P at 12%
16.8k/ year net return (after using personal allowance, starting rate for savings, personal savings allowance)
This would apply to a married couple with high net worth where one individual is a high earner and the other has no earned income.
2) higher rate tax payer (let’s call it 40% for simplicity sake although rates may vary (40,60,45)
140k invested will give around 10k net return (no savings allowances.
Could be much worse if earned income around 100k due to 60% tax cliff 100-122k
3) P2P isa, too risky in my opinion, can cut savings income but lose tax relief on losses which can hugely benefit example 1 as P2P investments grow. Also, due to ISA limit of 20k per year would need to invest small amounts in each loan to stay suitably diversified.
In summary P2P investing is most attractive to example 1.
I’ve started this thread to discuss how to maximise P2P income through tax efficiency for those with significant assets invested > 100k.
