Author Topic: Tax on savings interest  (Read 1890 times)

frugledoc

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Tax on savings interest
« on: July 30, 2017, 03:10:43 AM »
This is currently my favourite tax efficiency measure.

P2P income is taxed as savings interest.   My spouse is a SAHM so has 0 earned income.

We have invested P2P funds in her name, earning 12 - 15% tax free on asset backed loans (I don't like non asset backed loans).

Tax free interest:
- Personal allowance - 11,500
- Starting rate for savings - 5,000
- Personal savings allowance - 1,000

Total amount available for tax free income = 17,500 then 20% above that

https://www.gov.uk/apply-tax-free-interest-on-savings/how-much-tax-you-pay

Anybody who earns less than 17k per year can benefit from this tax allowance.

poppydog

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Re: Tax on savings interest
« Reply #1 on: July 30, 2017, 09:24:06 AM »
Hi Frugledoc

12-15% is really high - would you mind sharing with us your investment vehicle?

Thanks

PD

UKMustache

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Re: Tax on savings interest
« Reply #2 on: July 30, 2017, 11:59:44 AM »
In addition to the platform I'd be curious how long you have been doing it, what losses you have made etc.

I've been with ratesetter for about 3 years, I've averaged about 3.5% (per annum) on loans of 30 days at a time.  I've never lost a penny and everything has always been paid back exactly when they said.  I've paid in and then withdrawn part or all of the capital about 5 times.

I only mention how I've done it to give an idea of the kind of follow on questions I'll likely ask :)

frugledoc

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Re: Tax on savings interest
« Reply #3 on: July 30, 2017, 01:50:08 PM »
Hi Frugledoc

12-15% is really high - would you mind sharing with us your investment vehicle?

Thanks

PD

Sure, I use:
-  Moneything https://www.moneything.com/p2p/index.php/Auth/login.html
-  Collateral https://www.collateraluk.com/
-  ABLrate https://www.ablrate.com/Home/Login.aspx
-  Lendy Saving stream https://lendy.co.uk/loans/available

Have been doing it for 2 years and have had no losses but have seen some loans I wasn't in default and money recovered from sale of the asset.

http://p2pindependentforum.com/

Is where I learnt how to do it.  I avoid Ratesetter because I will only lend when there is an asset to back it up, although the sites I use mostly do not have a provision fund.

I have almost 300k invested in this so I am obviously a fan and keen on this type of investment, so please DYOR rather than listening to me!
« Last Edit: July 30, 2017, 01:58:02 PM by frugledoc »

poppydog

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Re: Tax on savings interest
« Reply #4 on: July 31, 2017, 02:22:22 AM »
Thanks Frugaldoc.  I've been looking at the forum you provided a link to.  Very interesting - there's a hint of fast moving activity and decision making which is a little alien to me, but I'll keeping looking and learning.

PD

RobFIRE

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Re: Tax on savings interest
« Reply #5 on: July 31, 2017, 06:34:15 AM »
I hadn't heard of the "Starting rate for savings", sounds like a pensioner votewinning policy, must not have been listening when that came in (though it's no use to me anyway).

For P2P I have money in Zopa, which gives projected returns of up to ~6.5%. I've had some bad debt though only about one fifth of the interest I've earned, so nowhere near being an overall loss for me in any year, and Zopa have been reporting that the bad debt has been lower than their projections, and some of the bad debt does eventually get partially repaid. Though as I pay new money in regularly I haven't been doing detailed tracking of actual return rates. I'd be surprised if rates of 12% can be achieved so easily (or at least, maintained in the long term without any capital loss).

skip207

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Re: Tax on savings interest
« Reply #6 on: July 31, 2017, 06:44:48 AM »
I am a bit wary of P2P at the moment, a lot of loading up with debt within the UK the last 3 years and you carry the risk. 
I am just unsure if its worth the risk right now.  At least with S&S you can in theory catch the falling knife and sell out at a loss but still recover the majority.

That said there is not really much else out there right now.

dreams_and_discoveries

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Re: Tax on savings interest
« Reply #7 on: August 01, 2017, 12:05:46 AM »
I agree having a non earning spouse does leave a fair tax allowance there to be filled; however personally I don't have that option!

As for P2P, I have money in zopa and ratesetter at the moment and have not suffered any losses yet. They do cherry pick the best borrowers, and have innovative credit risk assessments and modelling, so I would expect less defaults than mainstream lenders.  However the credit market in the UK is looking a bit shaky at the moment, getting to 2008 highs again...