Use Capital or Income allowance?

stphnstevey

I am fortunate enough to have both the £6K Interest Income tax allowance as well as the normal £11.7k Capital Gains tax allowance

I realise the tax tail shouldn't wag the investment dog (or something like that!), but equally I shouldn't ignore a tax saving if that fits in with my investment strategy.

I had been using some of the £6K allowance via P2P, but have tailored this back and interest is now well under this allowance

I have invested in ETFs and may have Capital Gains

I dont have funds to use up both allowances and I was wondering if I should be looking to use one in preference to the other? Or effectively whether to channel money into cash/P2P vs stock market?

Capital Gains seem a little harder to predict with the unpredictability of the stock market. Each year there is a chance I wont make a gain and the allowance is lost. Equally if I do have a bigger capital gain than my allowances (which is a nice problem to have), I need only sell enough to use my allowances.

Interest is a little more predictable, particularly in a bank account. P2P interest is less predictable as losses are not known. I am looking to reduce risk of P2P so that losses are minimised, but still no guarantees. However as the gain from interest is accumulated throughout the year, rather than a one time selling event as with shares, it is still more predictable than capital gains.

Interest allowances are affected by other income, but I dont see this changing for me or causing me to enter a higher tax band

I know most people pay little CGT and mostly IT, but have others experienced this issue? Are there any other considerations?

Thanks

AnotherJoe

I take it you've maxxed out ISAs and the ETFs arent in one?

stphnstevey

AnotherJoe wrote: »

I take it you've maxxed out ISAs and the ETFs arent in one?

Yes, unwrapped

AnotherJoe

Then I'd go back to your first comment regards tails and dogs. Do what you think will give you the best return taking into account predictability.

stphnstevey

AnotherJoe wrote: »

Then I'd go back to your first comment regards tails and dogs. Do what you think will give you the best return taking into account predictability.

Wood for the trees moment! Yes that makes sense.

I think ETFs, then if I ever use up the full capital gains tax allowance, then look at interest allowances

I will have some cash in reserve, so will use some of the interest allowances anyway