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How the Chancellor’s Autumn Statement Impacts P2P Lending
It's about taxes, so I'll be brief!
Less P2P lending due to frozen personal allowances
The income-tax personal allowance of £12,570 will be frozen until 2028! This will mean less disposable income available for lending.
More people will pay a 45% tax rate and lose their personal savings allowance
From April 2023, you'll be an additional-rate taxpayer if you earn over £125,000. This is down from £150,000.
This has two affects. Firstly, it reduces your disposable income for lending, as your top rate of tax will now be 45%, up from 40%.
Secondly, it means that you'll no longer benefit from the personal savings allowance. For higher-rate taxpayers, that was £500 per year in interest from P2P lending and savings accounts that you could earn tax free.
Still, there's always tax-free lending through IFISAs.
You can always pass your wealth to your spouse without charge. But, otherwise, you might need to plan the best way to reduce taxes for your beneficiaries, if you have a lot in savings and investments. That includes IFISAs, because ISAs are exempt from both income tax and capital-gains tax, but not inheritance tax.
The inheritance tax threshold is remaining at £325,000 per person, although your threshold can be added to your spouse's when you die.
The Chancellor froze this threshold until 2028, meaning more of your P2P lending returns could face inheritance tax as you grow that pot.
There's an outside chance this will also affect you
It's not often that you need to pay capital-gains tax as a result of P2P lending, but, if you do, your tax-free allowance drops from £12,300 to £6,000, and then to just £3,000 from April 2024.
Any gains over these limits, from all your investments outside of ISAs and pensions, will be taxable.
Other changes have an indirect impact
There are more tax rises or stealth rises, such as with National Insurance and dividend allowance cuts. Most of the changes will either reduce your disposable income, or that of your employer – impacting your pay rises – or adding to the costs of your P2P borrowers. The latter slightly increases the risk of loans turning into bad debts.
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