Will the tax free dividend allowance change affect how P2P income is taxed?

andromedean

I hear the tax free dividend allowance will be slashed from £5000 to £2000 from April 2018. Would this apply to P2P savings income from the first £5000 as illustrated below in the example shown.

If your total income from non- savings earnings — pensions, salary, rental income — is less than £17,000, you can earn another £5,000 from savings without paying any tax.....

You can add the ‘starting rate’ £5,000 to your £11,000 personal allowance before you need to pay tax on your savings.

http://www.thisismoney.co.uk/money/article-3525105/How-earn-17k-tax-free-Cash-changes-new-tax-year-including-higher-personal-allowance-new-savings-dividend-rules.html#ixzz4arI42o84

Dazed_and_confused

Never heard of P2P lenders paying dividends, always thought they paid interest so can't see how the change to the dividend allowance could be relevant.

The £5000 referred to in the quote is for interest however that quote is utter pants as it missing a crucial "upto" in from if the £5000.

Taxable salary of £15999 would leave just £1 of the £5000 savings rate band available, you can't have £17000 AND £5000 savings interest with no tax to pay on it

andromedean

The question is purely about if the changes in the budget affect the scenario below. In my case I draw down
11 k from a pension then attempt to obtain returns of around 5k from P2P plus bank interest. You can assume P2P are classed as savings income as that was well established last year.

You can add the ‘starting rate’ £5,000 to your £11,000 personal allowance before you need to pay tax on your savings.

Dazed_and_confused

Does your P2P provider pay you interest (seems the norm) or dividends (a new one to me).

If its interest then why do you think the budget announcement would affect you? Unless of course you have dividend income you didn't mention in your op

Are you getting confused between the £5000 savings rate band taxed at 0% and the dividend allowance band of £5000 also taxed at 0%?

polymaff

andromedean wrote: »

The question is purely about if the changes in the budget affect the scenario below. In my case I draw down
11 k from a pension then attempt to obtain returns of around 5k from P2P plus bank interest. You can assume P2P are classed as savings income as that was well established last year.

No. The IT proposals announced in this week's budget only affect dividend income.

andromedean

Are you getting confused between the £5000 savings rate band taxed at 0% and the dividend allowance band of £5000 also taxed at 0%?

Yes possibly, I'm just making sure these aren't related in some way.

Dazed_and_confused

I think you're the only person trying to connect them!