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FITs for income
40_and_2
Posts: 10 Forumite
Hi all
I am considering investing in a wind turbine, probably a 15kw. I want to try and do something positive for the environment but also see it as a good way of making money over the next 20yrs guaranteed.
My question is would i be charged 40% tax on profits as I am a 40% tax payer? I would not be using the power generated as my location is not suitable
I have read that 40% payers will "score" but don't understand why!!
I guess I need to speak to an accountant:eek:
I am considering investing in a wind turbine, probably a 15kw. I want to try and do something positive for the environment but also see it as a good way of making money over the next 20yrs guaranteed.
My question is would i be charged 40% tax on profits as I am a 40% tax payer? I would not be using the power generated as my location is not suitable
I have read that 40% payers will "score" but don't understand why!!
I guess I need to speak to an accountant:eek:
0
Comments
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FIT income is not taxable.
Why do you see it as a good way of making money(profit)? What calculations have you made - cost of installation, power generated etc?
Why is your location not suited to use the power generated? Do you mean your location is not suitable for a wind turbine as it won't generate sufficient energy.
15kW is a huge generator for private use, will make a lot of noise and cost a fortune.0 -
FITs income is currently untaxed, hence this investment is especially good for higher rate taxpayers (who are also more likely to be able to afford the upfront investment of course).
Future legislation is considered unlikely to scrap the payments, but of course they could become taxable in future.
Your post in other respects is confusing. You say you want to do something positive for the environment, but you will not be using the generated power as your location is unsuitable. What do you mean by this? Do you mean that you own land suitable for a wind turbine, but don't live on it, so would be exporting all the generated power?
Also, consider the many arguments for and against FITs. Some environmentalists (notably George Monbiot) have argued that they do not give as much "bang for your buck" as other options (such as larger scale wind farms, free insulation and double glazing etc). Also, do not believe the hype about a 10% tax free return on your investment - or whatever figure the turbine installers may throw at you. They may neglect to point out that of course your original capital is tied up in a very illiquid investment (ie one you can't sell to get your money back if you want it for something else) for a very long term, and the turbine itself will wear out meaning that at the end of its life you will have nothing left of the original capital, unlike say an investment bond on which you earn interest but also retain the capital. There may also be significant maintenance costs during the lifetime of the product.0 -
FIT income is not taxable.
Why do you see it as a good way of making money(profit)? What calculations have you made - cost of installation, power generated etc?
Why is your location not suited to use the power generated? Do you mean your location is not suitable for a wind turbine as it won't generate sufficient energy.
15kW is a huge generator for private use, will make a lot of noise and cost a fortune.
Without getting too involved in the detail, I have done a fair bit of calculating. I live on a windy island off the west coast of Scotland and reckon my investment of 56k would be paid back within 6 years assuming no tax, but my understanding is that tax is payable on unused (for your own use) profits. The location of my house is not suitable but i have land which is suitable0 -
FITs income is currently untaxed, hence this investment is especially good for higher rate taxpayers (who are also more likely to be able to afford the upfront investment of course).
Future legislation is considered unlikely to scrap the payments, but of course they could become taxable in future.
Your post in other respects is confusing. You say you want to do something positive for the environment, but you will not be using the generated power as your location is unsuitable. What do you mean by this? Do you mean that you own land suitable for a wind turbine, but don't live on it, so would be exporting all the generated power?
Hi, please see my previous answer as regards the tax situation as I understand it, and I would have to borrow half the cost.
Surely the payments are guaranteed for 20yrs as stated and are index linked
I can see how it was confusing, but you figured out my situation, yes looking to export all I produce.
Also, consider the many arguments for and against FITs. Some environmentalists (notably George Monbiot) have argued that they do not give as much "bang for your buck" as other options (such as larger scale wind farms, free insulation and double glazing etc). Also, do not believe the hype about a 10% tax free return on your investment - or whatever figure the turbine installers may throw at you. They may neglect to point out that of course your original capital is tied up in a very illiquid investment (ie one you can't sell to get your money back if you want it for something else) for a very long term, and the turbine itself will wear out meaning that at the end of its life you will have nothing left of the original capital, unlike say an investment bond on which you earn interest but also retain the capital. There may also be significant maintenance costs during the lifetime of the product.
To me an initial investment of 56k generating an income of 9k a year index linked for 20 years less servicing etc lets assume 1k per year would still give me 8k x 20yrs 160k total.
Seems like a very good return and doing something which hopefully is good for the planet at the same time or am I missing something?0 -
It might be legal, 40/2, but not very ethical for other energy users to subsidise your investment.0
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@Ken68
It's not quite that simple, though, is it? Yes, there's an argument that well off people will profit from this scheme, but the problem is that the UK needs to increase its renewables proportion considerably and this is one way to do it. The alternative is that commercial companies get involved in building more large scale wind farms etc (and we all know how difficult that is in the face of protests etc) and then they get the profits.... either way, renewables are currently both necessary and expensive, so everyone must subsidise their production. The only choice is who gets the profit from those subsidies.
And, yes, I'm aware that there are arguments as to whether the above presumptions are true (about needing to increase renewables etc) but this is not the forum to have them, and the fact is that this argument is accepted by those in power and the FITs have been introduced accordingly.0 -
A £56k investment giving a tax free, index linked return of £8k?(after an allowance for maintenance). A 20 year 14% tax free, inflation linked, investment eh!!
If your 'fair bit of calculation' indicates that is realistic - then go for it!!!
Do you get any guarantees on those figures? Installation cost?(including getting generated power to mains) Power generated? Maintenance contract for 20 years?
Do you not think that there might be a catch?0 -
To me an initial investment of 56k generating an income of 9k a year index linked for 20 years less servicing etc lets assume 1k per year would still give me 8k x 20yrs 160k total.
Seems like a very good return and doing something which hopefully is good for the planet at the same time or am I missing something?
Except that you've stated you have to borrow half the initial capital, so there'll be interest to pay on that. And the other half which you don't need to borrow, you could otherwise invest somewhere else to get a decent return. Both of these, as well as the write off of the initial capital have to be taken out of the "profit".
Also, the FITs have been designed to give somewhere around 8-11%pa return on investment. You are calculating nearer 17%, which makes me wonder where those figures are coming from.0 -
A £56k investment giving a tax free, index linked return of £8k?(after an allowance for maintenance). A 20 year 14% tax free, inflation linked, investment eh!!
If your 'fair bit of calculation' indicates that is realistic - then go for it!!!
Do you get any guarantees on those figures? Installation cost?(including getting generated power to mains) Power generated? Maintenance contract for 20 years?
Do you not think that there might be a catch?
It all depends on average wind speeds, not a problem here!
The equipment guarantee is for 5years, its still a fairly young industry so there is certainly an element of risk there.
To me it seems a good idea.0
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