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.
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.
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.
For all the resilience the UK economy has shown, there is no doubt that this year's ISA season is set against a backdrop of uncertainty. Whatever the pros and cons, Brexit, and a lack of clarity on what our future economic relationship with the EU will look like, has left us at a crossroads.
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 peer-to-peer (P2P) lending industry is now regulated by the Financial Conduct Authority (FCA). The regulatory framework has been designed to protect customers and promote effective competition.
When you earn interest from a regular bank savings account, for example, the bank automatically deducts basic rate tax (currently 20%) before paying your interest. With interest earned from peer-to-peer lending, tax is not deducted automatically so lenders will need to declare their income to HMRC.
The financial crisis is a bitter memory of what can go wrong when regulators lose control of markets. It seems hard to fathom now, but a little over a decade ago, buyers could acquire mortgages to the tune of 125 per cent of the home’s value (the Northern Rock Together mortgage being one of the most infamous), with only the most lax affordability checks standing in their way.
Numerous theories have emerged as to why the UK has endured such a severe productivity problem over the last decade. Growth in productivity of just 2 per cent during that period would typically have been accomplished within a single year prior to the financial crisis, and thus the 'productivity puzzle' continues to confound economists
In the aftermath of the financial crisis back in 2008/09, the Bank of England (BoE) had considerable headroom in terms of monetary policy, and - rightly - it made full use of it.
It’s no exaggeration to say that the global financial system as a whole is predicated on the ability to buy something now, and pay for it later. Barely anyone would be able to make a substantial purchase such as a house without an instrument like a mortgage.
With political parties jostling for position amid a series of Elections, and the ongoing spectre of a snap General Election looming large, the Labour Party put forward a policy last week which has proved to be a talking point: increasing the minimum wage to £10 per hour, and extending this to workers under the age of 18.