mikes1531
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Post by mikes1531 on Feb 4, 2017 18:32:32 GMT
It is perhaps worth taking the worked example from my previous post and looking at it from the point of view of the SM purchaser buying £1000 at 12% after 137 days (46 remaining) with 0.9% discount costs £1036.04 and on maturity (183 days) will receive £1060.16 back (see previous post for calcs), so a gross gain of £24.12 over 46 days For a non tax payer the annual yield is 18.47% (=24.12/1036.04/46*365) For a basic rate tax payer the tax due is £12.03 (=60.16*0.2) so the net gain is £12.09 (=24.12-12.03) and hence the net annual yield is 9.26% (=12.09/1036.04/46*365) For a higher rate tax payer the tax due is £24.06 (=60.16*0.4) so the net gain is £0.06 (=24.12-24.06) and hence the net annual yield is 0.05% (=0.06/1036.04/46*365) Thanks to mrclondon for this good example. Here are some observations I can add... Non-taxpayer: This is, AFAIK, how FS calculate the 'Effective rate' they show for parts for sale on the SM. Basic rate taxpayer: The after-tax rate doesn't match the 9.6% the seller is achieving only because the buyer is having to pay £1036.04 for the part rather than the par value. Higher rate taxpayer: This explains clearly why HRTs don't buy on the FS SM!
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mikes1531
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Post by mikes1531 on Feb 4, 2017 18:42:29 GMT
I pay 40%/60% tax as I am in the littoral zone of. I would thus get under 3% in 6 months and it would count as income tax pushing me further towards higher rate income tax. @leopardcat: How can someone who's in the zone of losing personal allowance not be in the higher-rate tax band already? Or did you mean to refer to the 45% 'additional' rate band?
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stub8535
Member of DD Central
personal opinions only. Not qualified to advise on investment products.
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Post by stub8535 on Feb 6, 2017 3:53:40 GMT
What an impact these posts have had on the sm. Loads of buying and/or withdrawal of offers coincided with the worked explanations.
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debaura
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Post by debaura on Jun 22, 2017 15:14:59 GMT
Is this correct then?
Loans sold for profit on the secondary market are subject to capital gains, but the interest accrued is income?
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locutus
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Post by locutus on Jun 22, 2017 15:57:25 GMT
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Post by investor1925 on Jun 23, 2017 11:12:57 GMT
It is perhaps worth taking the worked example from my previous post and looking at it from the point of view of the SM purchaser buying £1000 at 12% after 137 days (46 remaining) with 0.9% discount costs £1036.04 and on maturity (183 days) will receive £1060.16 back (see previous post for calcs), so a gross gain of £24.12 over 46 days For a non tax payer the annual yield is 18.47% (=24.12/1036.04/46*365) For a basic rate tax payer the tax due is £12.03 (=60.16*0.2) so the net gain is £12.09 (=24.12-12.03) and hence the net annual yield is 9.26% (=12.09/1036.04/46*365) For a higher rate tax payer the tax due is £24.06 (=60.16*0.4) so the net gain is £0.06 (=24.12-24.06) and hence the net annual yield is 0.05% (=0.06/1036.04/46*365) Thanks to mrclondon for this good example. Here are some observations I can add... Non-taxpayer: This is, AFAIK, how FS calculate the 'Effective rate' they show for parts for sale on the SM. Basic rate taxpayer: The after-tax rate doesn't match the 9.6% the seller is achieving only because the buyer is having to pay £1036.04 for the part rather than the par value. Higher rate taxpayer: This explains clearly why HRTs don't buy on the FS SM!
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Post by investor1925 on Jun 23, 2017 11:17:12 GMT
Correct me if I'm wrong, as I've yet to get my head round the taxation part of this lot.
If I have all of my FS investments in an IFISA I won't be paying income tax on anything that I get from it.
If I now buy on the secondary market at almost any kind of discount at all, I'm increasing the actual rate of return on that investment.
I'm aware of the fact that I'll be paying the seller's interest up front, but would get that back at the end of term (I won't renew).
Is this all correct or not ?
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SteveT
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Post by SteveT on Jun 23, 2017 11:22:31 GMT
Correct me if I'm wrong, as I've yet to get my head round the taxation part of this lot. If I have all of my FS investments in an IFISA I won't be paying income tax on anything that I get from it. If I now buy on the secondary market at almost any kind of discount at all, I'm increasing the actual rate of return on that investment. I'm aware of the fact that I'll be paying the seller's interest up front, but would get that back at the end of term (I won't renew). Is this all correct or not ? Correct in theory. In practice, it assumes the borrower manages to repay your capital and interest in full, which is not always the case. See "All Active & Secured Loans" page, then sort by the Defaulted column.
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