To ISA or not to ISA?

 With the end of the tax year 2016/17 in sight, lots of people will want to make use of their remaining ISA allowance, which according to GOV.uk (https://www.gov.uk/individual-savings-accounts/overview) is £15,240 per person per year. 

However, many people are unaware that they are able to set up self-invest ISAs for purchasing stocks & shares. With interest rates at such low levels, even the balance sitting in a Cash ISA will attract barely interest, thus encouraging individuals to invest their money in more risky assets. 

While the FTSE 100 dividend yield is currently around 3.79%, the share index is also over 7300 points, which in some people’s opinion may mean that upward breathing space is limited. 

Personally, having a share ISA means that capital increases and dividend payouts are effectively shielded from HMRC (and it’s also easier when doing taxes), and since the ISA allowance refreshes every year, it’s possible to build up quite a substantial income portfolio. 

The provider that I have been using for the last four years is Halifax Share Dealing, which charge a £12.50 yearly admin charge and £12.50 per trade (+stamp duty for UK stocks/funds). International stocks can also be bought and held in the account.

https://www.halifax.co.uk/sharedealing/Default.asp

Dividends from the shares you should can be paid out or re-invested automatically, although when you pay out the dividends they no longer count towards the dividend allowance limit (since April 2016, this has increased significantly, so you’d have to earn quite a lot of dividends to hit it – unless you are a business owner who receives dividends from their company. Update 8th March 17: The new budget seems to have taken note of this and the dividend threshold has been lowered from 5,000 to 2,000 per annum).

 

 

Posted by compusential_wp

Leave a Reply