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Peer-to-peer lending changes mean you can bet on an entrepreneur and earn 25% more

Changes in the Autumn Statement will enable investors who lend money to small businesses via peer-to-peer platforms to earn up to 25% more a year as a result of Chancellor George Osborne's decision to allow tax relief on any bad debts incurred if the companies they have invested in fail. Funding Circle co-founder James Meekings says the alteration to the tax system 'will make lending to small businesses via our marketplace much fairer for individual investors, putting them in an equal position to larger lenders such as banks'. A typical lender with the peer-to-peer website invests £5,000 a year, suffers 2% in losses and pays 1% in fees. This equates to an interest rate of about 6.5% and makes £325 profit against a headline rate of 10.5%. Tax is paid on the gross earnings, although the Government is hoping that the newly announced ability to claim tax relief on the losses will encourage more investors to lend to small businesses.

 

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