In line with our risk management framework, today we published our Q4 2019 performance update.
Your tax-related P2P lending questions answered
The last 12 months have generally produced a steady stream of good news for peer-to-peer lending platforms, with numerous beneficial regulatory changes having been proposed by Government in support of the industry and its lenders. Yet amid the feel-good factor, a recent announcement regarding lender fees by HMRC – later confirmed by the Financial Conduct Authority – might have been considered as something of a damp squib.
From 6 April 2015, personal taxpayers will no longer be able to offset lender fees or charges against interest earned under their loan contracts, and will need to declare the gross amount of interest arising during the tax year to HMRC. This is actually just a clarification of the existing rules, which HMRC accepted were not clear and therefore allowed lenders to declare their net income. It’s therefore unfortunate news for lenders making use of almost every P2P platform in the UK – except ours!
Lending Works did away with all lender fees in anticipation of this ruling last April, meaning that there is no difference between the gross and net interest you receive. However, lending with other fee-charging platforms will soon incur a higher tax charge on the same net income, which, in empirical terms, would mean a lower percentage of income going into your pocket than it did in this past tax year.
Tax, tax and less tax!
Budget 2015 gave us further reasons to cheer too, as George Osborne announced that interest earned on peer-to-peer loans will be eligible for the personal savings allowance. From April 2016, the first £1,000 of interest earned on all savings will be removed from income tax for basic-rate tax payers. For higher-rate tax payers, this amount drops to £500, but including P2P in this tax relief represents another major coup for the sector; especially when one considers that it will not apply to income earned from investments in shares or funds.
And the good times kept rolling at the House of Commons last week, as it was revealed that a consultation is taking place, and, depending on the outcome, Government could bring in a withholding tax regime from April 2017. Assuming the dice lands favourably, this means tax on lending income would be deducted at source, saving many lenders the hassle of completing a self-assessment tax return.
Will P2P and ISAs ever be united?
The Chancellor made the game-changing announcement at Budget 2014 that lenders would be able to hold peer-to-peer loans within Individual Savings Accounts (ISAs), and it emerged later in the year that a third-way ISA ISA, tailored specifically to P2P lending, could be introduced.
The final result? At the Summer Budget in July, we learned that a new Innovative Finance ISA (IFISA) will come into being next spring instead, although P2P loans will be a prominent commodity within this wrapper. Most importantly, this means that lenders will benefit from a significant tax saving. However, platforms will also be better-placed to define and communicate the risks and rewards of peer-to-peer lending than if P2P loans had simply been shoe-horned into the existing Stocks & Shares ISA. Happy days all round!
Our website offers information about saving, investing, tax and other financial matters, but not personal advice. If you're not sure whether peer-to-peer lending is right for you, please seek independent financial advice, and if you decide to invest with Lending Works, please read our Key Lender Information PDF first.
Since opening our doors back in 2014, we’ve always prided ourselves on living and breathing two key principles at Lending Works: innovation, and putting the customer first in everything we do.
With the retail sector enduring its fair share of challenges, companies are looking at new ways to attract customers, and drive conversion. In an overcrowded, dog-eat-dog marketplace, with behemoths such as Amazon flexing their muscle, it’s easier said than done.
On 4 June 2019, the Financial Conduct Authority (FCA) released its new regulatory framework for peer-to-peer lending (P2P); a Policy Statement known as PS19/14. As you might imagine, it's a document which, following a three-month consultation, is a hefty read of no fewer than 102 pages.
Wednesday’s Budget speech, coupled with the cut to Bank of England rates, represented a decisive response to the coronavirus. Here we analyse the impact it will have on mitigating disruption from Covid-19, along with the long-term implications of this significant fiscal stimulus.
Rumblings from the Treasury ahead of next week's Budget suggest tax grabs will be needed to fund increased spending, and it appears UK enterprise could be in the firing line. Here we articulate why targeting entrepreneurs and small business is ill advised.
In a difficult climate, customer acquisition and lead generation present stern challenges for UK retailers, and a great deal of marketing spend invariably gets directed towards getting feet through the door.
Over the last decade, there can be little dispute that the reputation of mainstream banks – and particularly the so-called ‘Big Four’ (HSBC, Barclays, Lloyds and RBS) – is at its lowest ebb.
The 2019-20 ISA season has been a damp squib, with banks disinterested in attracting savers’ cash, rates cut, and the stock market in freefall. However, the emergence of the IFISA means alternatives beckon for those seeking a stable middle ground in terms of risk and reward.
In a decade of slow recovery, the rapid rise in asset prices has been the standout. But how sustainable has price growth been, and could we be in the midst of a bubble?
Most people consider income tax to be a given, but in the UK it is barely two centuries old. In this article, we look at how this tax has developed over the years, and also why it is set to remain at the core of our tax system for many decades to come.
Open banking celebrated its second birthday last month, but has the ‘revolution for financial services’ that was promised actually come to pass? In this article, we look at the progress the initiative has made so far, and what the future holds in the face of high levels of scepticism.
On the face of it, a 'broken' energy market needed fixing, and the price caps introduced in early 2019 were heralded as the solution. But, one year later, have they actually helped consumers save?