Peer-to-peer lending sites: MSE guide discussion
Comments
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Hi, I just wondered if tax on any money you make off of this is deducted automatically or if you have to declare it...
In response to you both, I think the tax situation is reasonably well explained on the FC website. You should receive at the end of March a tax statement that takes into account interest, minus fees and any bad debts (tax-deductable*). Like myself, you are not self-assessed but just PAYE through an employer? So you can find out the address of the tax office (see payslip / P60) and your NI number, and I would just mail a copy of the statement to the tax office and ASK THEM WHAT TO DO. They should either bill you or adjust your tax code to cover the amount owing.
There is some surmise in all of this because I am in my first year too! (Advice always welcome.) But 20% of a modest net profit isn't going to sting anyone. Still much better than any reputable ISA. Though I am moving towards Ratesetter at present, to cover myself with some safer capital. [Do PM for a referral with £20 Amazon vouchers.]
Regards, Rich.
* But see my later post regarding Capital Gains Tax versus Income Tax - it may be that the tax is only recoverable in practice if the unrecoverable debts are actually recovered in subsequent years!! Yes, this is more complicated than it sounds...0 -
In response to you both, I think the tax situation is reasonably well explained on the FC website. You should receive at the end of March a tax statement that takes into account interest, minus fees and any bad debts (tax-deductable). Like myself, you are not self-assessed but just PAYE through an employer? So you can find out the address of the tax office (see payslip / P60) and your NI number, and I would just mail a copy of the statement to the tax office and ASK THEM WHAT TO DO. They should either bill you or adjust your tax code to cover the amount owing.
There is some surmise in all of this because I am in my first year too! (Advice always welcome.) But 20% of a modest net profit isn't going to sting anyone. Still much better than any reputable ISA. Though I am moving towards Ratesetter at present, to cover myself with some safer capital. [Do PM for a referral with £20 Amazon vouchers.]
Regards, Rich.
Sorry ive been a sole trader, and had to fill in tax forms for the past 10 years. The only way the govt will help you is if you make an appointment and take _ALL_ your P60's, statements up there, and they can assist you to tell you what figure to put in what box of the paper return, but you need to know all the figures and fill it in yourself. just telling them youve made £500 interest will need to be factored into everything else tax wise, which is why you need the return done in full.
Also there is an earlier cutoff point for the paper returns of September/October too, for the tax year ended 5th april, but online bits can be done right up till 31st jan, but the advisers in the tax office cannot help you with those. (though they can walk through the paper version for you to submit it online.
it takes 2+ weeks for first registration online for the gateway/self assesment services so dont be leaving it late now also. Once youve done it once its a breeze honest,and youll have acess to each historic submission forever & ever online too :A0 -
Sorry ive been a sole trader, and had to fill in tax forms for the past 10 years. The only way the govt will help you is if you make an appointment and take _ALL_ your P60's, statements up there, and they can assist you to tell you what figure to put in what box of the paper return, but you need to know all the figures and fill it in yourself. just telling them youve made £500 interest will need to be factored into everything else tax wise, which is why you need the return done in full.
Thanks for that terrifying info, corrsfan! Fortunately (unfortunately?), most of us will be on PAYE and earning less than £2,500 extra per year from these investments, hence able to choose to avoid self-assessment:
http://www.hmrc.gov.uk/incometax/ways-to-pay.htm#5
"If you're an employee or a pensioner and you want to pay tax on some of your non-employment income - like investment and rental income - through PAYE rather than by Self Assessment you can ask HMRC to collect it this way. You can do this for up to £2,500 of extra income in a year. If you earn more than £2,500 from savings, investments or rental income you'll need to fill in a tax return."
So I need to write to my tax office and mention the FC and RS accounts and ask what to do next...
Rich.x0 -
A few figures might be of interest. I started in Jan 2011 with £1000 increased it to £1500 and then to £2000 currently. Difficult to work out but an average balance of £1000 in the first year and £1800 in the second year wouldn't be far out. My gross earnings have been £170.68 minus £23.18 fees minus £50.39 bad debts equals net earning of £97.11 over two years. The bad debts have all come in this second year, so the return in the first year was indeed about 8% gross,7.3% net, but in this second year after fees and losses it has been about 1.3%. I'm sorry but this is not good enough and I'm in the process of pulling my money out. Very disappointing.
I'm sorry to hear you've been stung but sort of glad to hear that I'm not the only one who happens to have way to much bad debt.
It seems FC has serious problems with vetting the companies. I invested about £2500.- for a bit less than a year now.
Already I have bad debt almost equaling my interest minus fees and a further 3 loans about to default which would take my loss to about 10%. Its worth noting that all of the loans which were bad were A* or A rated.
Needless to say that I'm taking my money back as it comes off the loans...
So all I can say is be very wary of the headline rates.0 -
with regards to funding circle, can you guys review my thought process?
Go to loan requests, find a good return loan, let's say 8%. Buy £100 worth in £20 chunks.
If you win the auction, immediately put your parts for sale for a 1.5% premium.
So now instead of waiting 12-60 months for your money to be returned, you basically immediately make a good % right off the bat - they only take a .25% commission or something from what i remember.
Doesn't this mean it's in your best interest to just nab up loans - as many as you can, and immediately sell them if you win the bids?
I'm sure I'm missing something but I can't picture what it is?5.41 kWp System, E-W. Installed Nov 2017
Lux + 3 x US2000B + 2 x US3000C battery storage. Installed Mar 2020.0 -
...it's in your best interest to just nab up loans - as many as you can, and immediately sell them if you win the bids?
That makes sense. Although in your example you'd make maybe 1.25% gross or £1.00 net. So you'd need to turn over a lot of trades to make an income, compared with sitting on the loan parts. I suppose if you bought a chunk of almost everything over a certain rate, you'd be earning faster than I can.
Anyone else have deeper thoughts on this?
Rich.x0 -
So I need to write to my tax office and mention the FC and RS accounts and ask what to do next...
Quoting myself is the first sign of madness... but I heard back from HM Revenue & Customs today, and they did indeed say simply to:
"...send us the profit and loss statement each year to enable us to assess the amount of tax due."
So, if you are not in business and not self-assessed, it should be easy!
Rich.x
p.s. feel free to PM for referral to Funding Circle or Ratesetter - I am currently earning 9% [minus their fee equivalent to 1%] and 6% respectively - gross of tax. Watch this space...0 -
New to this and to Funding Circle, I decided to invest at the beginning of Jan 2013 as 8-9% return looked good, but I assumed this was over a year but its not, its all very complicated as their loans are based on the Amortising calculation. I stupidly assumed I would get 8-9% per year, but with fees etc, I feel I will be lucky with a 36 month loan to get these numbers, which makes their APR a lot less than the 8%+ i hoped to get. FC tell me the return per month should be reinvested to get the best %. As you receive interest and capital per loan per month, so you can reinvest, albeit each loan is a small sum. Being new to it all I wonder if I have this correct, also their web pages/summary pages are not user friendly, or have I missed something.
Thanks in advance0 -
FC tell me the return per month should be reinvested to get the best % ... albeit each loan is a small sum.
My understanding is that the % shown is the flat rate paid on the outstanding amount, which diminishes monthly, hence becomes vanishingly small towards the end of a loan. I need to reinvest the repayments and interest from time to time. Buying loan parts is a useful way to do this as you can get decent rates on parts costing £15-£25 or so. I should post something about buying loan parts if anyone is interested?
Rich.0 -
Ratesetter is very inflexible when it comes to identity verification. I tried to set up a linked account to operate on behalf of my mother, but although she has lived here all her life, owned a house, has several bank/savings acounts, and is on the electoral register she never seems able to be verified electronically. Ratesetter asked for either a driving license or passport for verification. She has neither. Usually pension documents, bank statements, utility bills are sufficient for other institutions, but Ratesetter just refused to accept any of these and just said she could not invest.
I have lost count of the number of times I have had to help her send off identity documents to various banks etc. and there seems to be no way of updating the central records so it has to be done again each time. But this is the first time an organisation has been so inflexible. If anybody knows a way of getting her identity recorded permanently please let me know.0
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