Author Topic: UK Investor?  (Read 33498 times)

happycat

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UK Investor?
« on: August 05, 2014, 12:34:29 PM »
I'm 35 years old I have 17000 to invest as a lump sum, and 1400 every month to invest there after.
I own two rental properties and my home is paid off.

I phoned an independent advisor about the best way to proceed investing in stocks/shares/bonds. He basically said open a SIPP/ISA
But If I want to retire before 55 then is there any point putting anything in a SIPP.

I'm going with iWEB as my brokers but they said I need to phone the trading department to work out what bonds are eligible to be put in an ISA, has anyone got any codes for ISA eligible bonds?

Thanks guys :D

daverobev

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Re: UK Investor?
« Reply #1 on: August 05, 2014, 01:08:56 PM »
iweb sharedealing? Just buy a gilt etf - iglt I think. Then VUKE, HMCX, etc. ETFs are great, IMHO.

happycat

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Re: UK Investor?
« Reply #2 on: August 05, 2014, 02:08:42 PM »
OK Great.
If I want to retire early (i.e before 55) do I need to bother with putting everything in a SIPP (outside the ISA)?
I get the point of having a SIPP, but I thought they didn't kick in until after 55.

daverobev

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Re: UK Investor?
« Reply #3 on: August 05, 2014, 03:27:37 PM »
Well, depends. I have a stakeholder pension plan from a few years back, but don't live in the UK any more.

You can just keep the SIPP invested and 'draw down' your ISA or non-sheltered investments first, it just means you'd want to keep each place more self contained regarding asset allocation.

Say you can FIRE with 300k = 12kPA SWR. If you are 40 when you FIRE you need enough to draw down til you hit 55, right? Makes the maths more complicated but not bad, you'll just be selling some stuff while reinvesting other stuff. Make any sense? If you have 100k in the SIPP you just let it grow for those years, first taking money from any unregistered account, then the ISA.

happycat

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Re: UK Investor?
« Reply #4 on: August 06, 2014, 01:53:17 PM »
Ok I'm trying to set up my platform with iWEB

They don't do regular investments anymore (at 2 per shot) I have to manually make the investments every month (at 5 per shot).

How do I set up the platform. I can open an ISA then put the bonds into it, but I'm hoping to put 25000 per annum into this, what do I do with the ten grand that falls outside the ISA?
Shall I just leave the stocks that don't pay dividends outside the ISA?
I don't want to bother with a SIPP, I'd like the money in ten years not twenty.

Another thing.... if I web hike up the cost of trading, can I move to another platform (like Interactive Investor) or will I have to start again with a new ISA and miss out on all the benefits?
Can I move stock that isn't in an ISA between brokers?

daverobev

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Re: UK Investor?
« Reply #5 on: August 06, 2014, 02:51:51 PM »
I'm out of touch, sorry. Yeah it was it when iWeb stopped reg. investments.

Asset alloc: if you have any UK domiciled stocks, they are most efficient (least bad) to hold outside the ISA as there is a dividend credit. Most ETFs are not UK domiciled, even when they hold UK stocks, sadly.

Bonds are usually worst outside a tax shelter.

http://monevator.com/compare-uk-cheapest-online-brokers/

There are fees for transferring. But you can certainly sell everything within an ISA, transfer it, and rebuy; shouldn't be fees for doing that.

Other forums (moneysavingexpert?) might help more on the specifics, sorry.

frugledoc

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Re: UK Investor?
« Reply #6 on: August 06, 2014, 03:13:20 PM »
Do you have any other pension provision.

If you are a higher rate tax payer I would max out your 15k ISA allowance and then put anything left over into the SIPP. 

The SIPP will give you 20% basic rate tax relief inside the SIPP wrapper and you can claim the higher rate back in your tax return.

If you are earning between 100 to 120 thousand per year then SIPP will get 60% tax relief and 2% NI rebate so definitely pay into a SIPP first if you earn this much.


happycat

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Re: UK Investor?
« Reply #7 on: August 06, 2014, 03:54:33 PM »
I have no pension, as my company does not provide. I have no private pension.
I'm in the 20% tax bracket. I just have a little side project that brings in some decent cashhhhhhh ;)

If I put anything above 15000 in a SIPP, how do I access it at 45, or Do I have to wait until 55?

Like darobev says, just stockpile a bit more cash for 10 years (or property) and wait until 55 for my pension to kick in.
I think I could work with that.

frugledoc

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Re: UK Investor?
« Reply #8 on: August 07, 2014, 03:17:17 AM »
I have no pension, as my company does not provide. I have no private pension.
I'm in the 20% tax bracket. I just have a little side project that brings in some decent cashhhhhhh ;)

If I put anything above 15000 in a SIPP, how do I access it at 45, or Do I have to wait until 55?

Like darobev says, just stockpile a bit more cash for 10 years (or property) and wait until 55 for my pension to kick in.
I think I could work with that.

Pension cannot be accessed until 55, and it looks like the government want to make this 58. 

It is very frustrating that the financially literate amongst us are forced into suboptimal choices so that the financially illiterate can be protected.

You have two rental properties, are they paid off in full?  Sounds like you will be able to get a good income stream by time you are 45 if you put 15k a year into ISAs starting now and your rental income.
« Last Edit: August 21, 2014, 02:41:34 PM by frugledoc »

happycat

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Re: UK Investor?
« Reply #9 on: August 13, 2014, 01:40:58 PM »
Ok guys!

Stole the codes from another thread. The codes I want to buy for your typical armchair investor are....

HUKX.L      Irish domiciled, ISA Approved (FTSE 100 ETF)
HMCX.L      Irish domiciled  ISA Approved  (FTSE 250 ETF)
IGLT.L        Irish domiciled,  ISA Approved (bonds)
IWRD.L      Irish domiciled,  ISA Approved (Foreign ETF)

I've got two accounts with iWeb

my share dealing account (CMA)
my ISA

Obviously I want to put the bonds in the ISA
So if I'm spending 23000 on these in a ratio of

25
25
25 (bonds)
25

25% of 23000 = 5750 of bonds in this tax year.
What should I  put in the ISA next?






NearlyThere

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Re: UK Investor?
« Reply #10 on: August 13, 2014, 01:55:08 PM »
Just a quick observation, is your cash, ACTUAL CASH or do you declare these earnings?

Might be an option to live off your cash and use your already taxed earnings for investment in an ISA. Your lump sum should go straight into a Stocks and Shares ISA.

Personally I have two accounts, ISA and SIPP. The isa is filled first and all remainder savings into the SIPP. As it will be left untouched for longer, I'll need much less invested in it at an early age to hit my FIRE number.

You can out 15k per annum in your isa and up to 40k in your sipp, but as you are a 20% tax payer, maxing this out is already a 37.5% saving rate. And remember there are tax savings for using the sipp.

happycat

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Re: UK Investor?
« Reply #11 on: August 13, 2014, 03:19:28 PM »
The money is declared earnings.
The actual cash will be going into paying my two houses down.

So instead of a CMA assume I've got a SIPP,

I put the bonds in the ISA first, then which one next next?


NearlyThere

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Re: UK Investor?
« Reply #12 on: August 13, 2014, 03:31:10 PM »
Personally after the ISA I'd pay the houses down. Thats what I did and its more a mental thing. I would have earned 3% more in the same period but knowing I own my own properties.....outright makes a huge difference to my mental well being.

No one can take my house or business away from me.

Now they are cleared I max out my sipp. As does my wife. Are you married? Have a life partner? Can they join your business and take earnings into their sipp/isa?

NearlyThere

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Re: UK Investor?
« Reply #13 on: August 13, 2014, 03:32:00 PM »
also remember to minimise your taxes through your second income and any costs associate with this.

daverobev

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Re: UK Investor?
« Reply #14 on: August 13, 2014, 04:07:05 PM »
Generally keep local stuff unregistered where necessary, and lower divi stuff... So FTSE250 would be my first choice.

You'd have to look into it, but there are db (deutsche bank) etfs that are accumulation rather than distributing... so no tax except cap gains, for which there is a yearly exemption so you can move bits into an ISA in the following years, if you have spare room.

happycat

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Re: UK Investor?
« Reply #15 on: August 14, 2014, 11:47:28 AM »
Generally keep local stuff unregistered where necessary, and lower divi stuff... So FTSE250 would be my first choice.

Could you clarify this please daverobev, I'm not sure what you mean?

And what's the difference between accumulating ETF's and distributing?



Am I right in thinking that my income from ETFs would be taxed at the same rate as normal income?
So that means I'm allowed 10000 as personal income per year?
If so, does it matter if all my investments are in a tax wrapper?
All I want it 10000pa and I'll be a happy little bunny.

What's more, the plan is to live in abroad in a nice hot place for 6 months of the year, would that affect the tax I pay?

daverobev

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Re: UK Investor?
« Reply #16 on: August 14, 2014, 12:24:48 PM »
Accumulating pay no dividends, but everything is automagically reinvested. Distributing pay out. Whether the acc funds pay tax in the background I'm not sure. Look on the Deutsche Bank ETF website for some funds.

You need to make sure you stay tax resident in the UK; if you're overseas too much you might get in a muddle (usually it's half a year in the tax year).

Your Personal Allowance is 10k yes, so if you don't get more than that once you retire, no tax. The point is what happens while you're saving and investing - it's all compounding, but if you're earning 30k and getting 5k of dividends, you'll be losing a lot of that 5k. Once you retire, if you're living frugally, it matters less.

You don't just get the 10k personal allowance, though - you also get a capital gains allowance. And, of course, any pension, ISA room, etc.

daverobev

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Re: UK Investor?
« Reply #17 on: August 14, 2014, 12:26:41 PM »
Also - you say you have two rentals, well, income from them will go against your allowance.

The FTSE 250 generally has a lower yield than the FTSE 100. So you'd pay less tax on that if you hold it in a non sheltered account.

happycat

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Re: UK Investor?
« Reply #18 on: August 16, 2014, 07:33:30 AM »
Accumulating pay no dividends, but everything is automagically reinvested. Distributing pay out. Whether the acc funds pay tax in the background I'm not sure. Look on the Deutsche Bank ETF website for some funds.

So you're saying that ETF's that are only there for capital gains and not dividend payouts are the way to go?
I thought I would need the dividends to live off. For example once the dividends were paying out 10000, that would allow me to retire?
Was I on the wrong path thinking like this?

I spoke to iWeb and they said that any dividends are automatically re-invested on the HUKX.L  and the HMCX.L.
I don't know what I'm looking at with the  Deutsche Bank ETF?
It doesn't make it clear on the site how tax is paid?
Are you saying there are  Deutsche Bank do British ETFs domiciled in the UK?



You need to make sure you stay tax resident in the UK; if you're overseas too much you might get in a muddle (usually it's half a year in the tax year). 

I also thought if you were living abroad that would help your tax situation?

Your Personal Allowance is 10k yes, so if you don't get more than that once you retire, no tax. The point is what happens while you're saving and investing - it's all compounding, but if you're earning 30k and getting 5k of dividends, you'll be losing a lot of that 5k. Once you retire, if you're living frugally, it matters less.

Ahh I see, so If I'm on 25k pa with my current job, that affects the way my investments ate taxed?





Also - you say you have two rentals, well, income from them will go against your allowance.

I have two rental properties, the mortgages outstanding are 90k and 93k respectively. 
Would it be better to try and get a share portfolio of 183k and just pay them both off instead of living of dividends?


The FTSE 250 generally has a lower yield than the FTSE 100. So you'd pay less tax on that if you hold it in a non sheltered account.

So you're saying after I've put all my bonds in the ISA, the FTSE 250 ETF's should be my next choice to fill up the ISA?

I'm going to cut to the chase here. I feel a lot of what you've said is relevant to me, I'm just not sure how.
My overall goal is to get a passive income stream of 10k.
How would you go about it in my situation.

daverobev

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Re: UK Investor?
« Reply #19 on: August 16, 2014, 10:10:52 AM »
Accumulating pay no dividends, but everything is automagically reinvested. Distributing pay out. Whether the acc funds pay tax in the background I'm not sure. Look on the Deutsche Bank ETF website for some funds.

So you're saying that ETF's that are only there for capital gains and not dividend payouts are the way to go?
I thought I would need the dividends to live off. For example once the dividends were paying out 10000, that would allow me to retire?
Was I on the wrong path thinking like this?

I spoke to iWeb and they said that any dividends are automatically re-invested on the HUKX.L  and the HMCX.L.
I don't know what I'm looking at with the  Deutsche Bank ETF?
It doesn't make it clear on the site how tax is paid?
Are you saying there are  Deutsche Bank do British ETFs domiciled in the UK?



You need to make sure you stay tax resident in the UK; if you're overseas too much you might get in a muddle (usually it's half a year in the tax year). 

I also thought if you were living abroad that would help your tax situation?

Your Personal Allowance is 10k yes, so if you don't get more than that once you retire, no tax. The point is what happens while you're saving and investing - it's all compounding, but if you're earning 30k and getting 5k of dividends, you'll be losing a lot of that 5k. Once you retire, if you're living frugally, it matters less.

Ahh I see, so If I'm on 25k pa with my current job, that affects the way my investments ate taxed?





Also - you say you have two rentals, well, income from them will go against your allowance.

I have two rental properties, the mortgages outstanding are 90k and 93k respectively. 
Would it be better to try and get a share portfolio of 183k and just pay them both off instead of living of dividends?


The FTSE 250 generally has a lower yield than the FTSE 100. So you'd pay less tax on that if you hold it in a non sheltered account.

So you're saying after I've put all my bonds in the ISA, the FTSE 250 ETF's should be my next choice to fill up the ISA?

I'm going to cut to the chase here. I feel a lot of what you've said is relevant to me, I'm just not sure how.
My overall goal is to get a passive income stream of 10k.
How would you go about it in my situation.

Phew. Ok.

With iWeb you have the choice of dividend handling. Reinvest (whole units, ie if you have 19.99 in dividends but each share is 20.00, you'll get 19.99 in cash), hold in account as cash, or pay to your bank.

Tax is progressive. The first 10k in the UK (near enough) is tax free; that is your personal allowance. After that, you pay tax. If you have lots of different kinds of income it gets complicated. Anything in a pension is not taxed until you withdraw it, anything in an ISA is not taxed full stop.

Your rentals - need more info on whether or not they are cashflowing. Living off rental income is fine, but you want some serious cash hanging about for periods of vacancy and renovations. In the UK I guess 0.5% is reasonable as rent (gross) per month - so on a 100k property, if you were getting 500+ you'd be doing ok.

Pretty much no ETFs are UK domiciled; they all seem to be Irish (which is fine, no tax is withheld). Sorry, "all" is too strong, but the HSBC ones, Vanguard, etc are. They are on the London Stock Exchange though. I'm saying the opposite with HMCX; that is a good candidate for OUTSIDE a pension or ISA as it pays lower dividends so there will be less tax (because there is less income to tax).

Eg: You earn 25k, get 5k after expenses from your rental properties, and 10k from (Irish domiciled) ETFs. Your gross income is 40k. You are going to pay approximately 20% in tax on 30k of that (excl. the 10k personal allowance), but of course you also pay National Insurance on your employment income. You do NOT pay that, just tax, on the other sources of income.

I suggested the 'acc' funds just while you are gearing up for retirement. Once you've retired you want distributing ones, as you say, to live on.

The general rule for a balanced stock/bond portfolio is that you can safely withdraw 4% of the total (including divis!) a year - meaning, if you want 10k, you should have 250k invested.

Clear as mud?

daverobev

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Re: UK Investor?
« Reply #20 on: August 16, 2014, 10:15:17 AM »
Oh yeah, if you have rentals you must already be filling in a self assessment tax return, right? So you pay tax on foreign dividends by putting all that info in to your tax return.

Without knowing the rental info it's impossible to say how I'd proceed, but if you're intending on keeping them I'd look at the mortgage rate - if greater than 6% or so I'd probably pay money off them, otherwise shove money into the ISA. But it doesn't have to be all or nothing... I was in a similar position, paying off a high 5% mortgage but also putting some money into the stock market. In hindsight I should've put more into stocks and less into the mortgage, but having the mortgage gone certainly felt nice.

happycat

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Re: UK Investor?
« Reply #21 on: August 21, 2014, 05:42:52 AM »
Current income
-------------------

Wage 23500 pa            (tax 20%)
Cash Wage 20000 pa   (tax 0%) shhhh

Rental property 1. income =  575 pcm
Rental property 2. income =  675 pcm

Current outgoings
-----------------------

Property 1. I paid 125k and have 90 mortgage (interest only 3.5% pa)
Property 2. I paid 125k and have 93k mortgage (interest only 3.5% pa)

Any profit from the properties is used to pay off capital on them.

This is my current financial situation.
---------------------------------------------

I have a home worth between 110k and 130k with a 30k mortgage

All my expenses after mortgages (i.e. bills, food, petrol etc) are about 650 per month.
I have no debt apart from the three mortgages mentioned.
I have no partner.

I get what you're saying about being tax efficient WHILE you're building up the investments in stocks/bonds.

What would you advise daverobev?

daverobev

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Re: UK Investor?
« Reply #22 on: August 21, 2014, 07:49:25 AM »
You should be investing, in your ISA, hand over fist with those numbers! That's a huge amount you're bringing in.

Invest, plug away at your mortgage first (as it's not tax deductible), let it brew for 5 years and you should be done.

IMHO not declaring income is very uncool, /shrug. I understand why you'd want to hide it, but again IMHO it is stealing from society.

happycat

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Re: UK Investor?
« Reply #23 on: August 21, 2014, 02:38:14 PM »
I'm very sorry if I've offended you.
I won't insult you further by trying to justify it.

Can I continue to ask advice, or should I consider this thread terminated?

daverobev

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Re: UK Investor?
« Reply #24 on: August 21, 2014, 03:01:00 PM »
I'm very sorry if I've offended you.
I won't insult you further by trying to justify it.

Can I continue to ask advice, or should I consider this thread terminated?

This is the internet ;) As they say: opinions are like arseholes, everyone has one. You can be offended at my comment if you want, but I think if you re-read it, it wasn't a personal attack.

But no, generally, I don't think there can be justification for tax avoidance. Tax mitigation, sure, but avoidance is taking the mickey out of everyone that does pay their fair share.

Does that mean I'm walking out in a huff? Not at all. I think a lot of things are bad, but people are entitled to do as they wish. For example I find religion 'stupid' but don't want to ban it, nor do I refuse to talk to people who are religious.

You're in a great position with your income and rentals. You can retire in 10 years or less, if you want to. You certainly appear to be able to do all that, whilst paying tax due.

If you get the money from prostitution, for example, that you cannot declare then... yeah I suppose I'd accept that, reluctantly.

frugledoc

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Re: UK Investor?
« Reply #25 on: August 21, 2014, 03:27:29 PM »
Suggest continue the thread.  I'm not offended by tax evasion unless you are google, amazon, any jerk off bank etc.


happycat

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Re: UK Investor?
« Reply #26 on: August 21, 2014, 03:57:06 PM »
daverobev, I fully understand your point of view, and I also agree with you in principle, even if I don't currently practice what I preach.  I promise I will one day.

I was thinking about putting about 30k per annum in to stocks and shares.
My approach is now as follows?

15k in the ISA maxed out with bonds (IGLT.L ) and foreign ETFs (IWRD.L )


15k outside the ISA made up of FTSE250 (HMCX) and FTSE100 (HUKX)
I will be paying tax on these.

Does this seem like the most tax efficient way to allocate these ETFs, or should I hold the FTSE100 ones in the ISA instead of the IWRD ones?

Prostitution....not quite. But it's risky to file taxes as a lap dancer while holding down a responsible job too.
I'm not proud of myself, but I've put myself through university with no help off my parents or family. I've never relied on a man.
Lap dancing is the only part of my life i lucked out on, I'm just trying to make the most of it.

daverobev

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Re: UK Investor?
« Reply #27 on: August 21, 2014, 04:04:56 PM »
daverobev, I fully understand your point of view, and I also agree with you in principle, even if I don't currently practice what I preach.  I promise I will one day.

I was thinking about putting about 30k per annum in to stocks and shares.
My approach is now as follows?

15k in the ISA maxed out with bonds (IGLT.L ) and foreign ETFs (IWRD.L )


15k outside the ISA made up of FTSE250 (HMCX) and FTSE100 (HUKX)
I will be paying tax on these.

Does this seem like the most tax efficient way to allocate these ETFs, or should I hold the FTSE100 ones in the ISA instead of the IWRD ones?

Prostitution....not quite. But it's risky to file taxes as a lap dancer while holding down a responsible job too.
I'm not proud of myself, but I've put myself through university with no help off my parents or family. I've never relied on a man.
Lap dancing is the only part of my life i lucked out on, I'm just trying to make the most of it.

Ideally you want the things outside the tax shelter that will pay the lowest in dividends... and I guess grow the least (but if you knew something would grow less than something else, you wouldn't buy it!).

I'd take a look at the yields. The UK is pretty nice in that you get a capital gains exemption every year, so you can 'bed and ISA' and rebalance without incurring any tax.

I think FTSE 250 yields less than the 100 so that can stay out. FTSE 100 is actually quite high yielding so that is probably good to go in. See what the yield is on IWRD?

Oh yeah - there will be foreign withholding taxes on IWRD, which are probably irretrievably lost inside the ISA, but you can use that to offset tax to pay. So IWRD out, most likely.

Guessing you want IWRD > 250 > 100 to be outside the shelter.

frugledoc

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Re: UK Investor?
« Reply #28 on: August 22, 2014, 08:19:23 AM »
There is no extra tax to pay on dividends for lower rate tax payers so it doesn't really matter if the are held inside or outside the ISA wrapper.

Main difference is capital gains tax protection from an ISA although if you are never going to sell this doesn't really matter.

Where will the foreign witholding taxes be with IWRD.  It is an ETF listed on the london stock exchange so there will be no further tax to pay on dividends for a lower rate tax payer?
« Last Edit: August 22, 2014, 08:21:32 AM by frugledoc »

daverobev

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Re: UK Investor?
« Reply #29 on: August 22, 2014, 12:20:14 PM »
There is no extra tax to pay on dividends for lower rate tax payers so it doesn't really matter if the are held inside or outside the ISA wrapper.

Main difference is capital gains tax protection from an ISA although if you are never going to sell this doesn't really matter.

Where will the foreign witholding taxes be with IWRD.  It is an ETF listed on the london stock exchange so there will be no further tax to pay on dividends for a lower rate tax payer?

Do you have firsthand experience of this? It's not where the ETF is listed, it's where it is domiciled. You do pay tax on dividends from all those ETFs, and they show up as Non-UK Equities. AFAIK there aren't any UK domiciled, FTSE 100 ETFs (strange as that sounds) - they are all Irish, Luxembourg, etc.

British *shares* won't attract more tax. But ETFs containing them will (even though there is no withholding!).

Eg:

Non-UK Equities
Pay Date    Quantity & Investment    Gross amount of chargeable payment ()    Foreign withholding tax paid ()    Net dividend paid ()
10 May 2013    125
HSBC ETFS PLC  FTSE 250 UCITS ETF    7.39    At 0.00%
0.00    7.39

So you'd pay 20%, as a lower rate taxpayer, on that 7.39

happycat

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Re: UK Investor?
« Reply #30 on: August 26, 2014, 10:20:12 AM »
I funded my account, and intended making my first purchase today.
However, I thought I'd check first that the four stocks were accumulating dividends, but it turns out they're not.

The lovely lady on the phone informed me that they pay out on set dates, but I can set up my ISA to automatically re-invest the dividends.
Is it sensible to set up my investment strategy this way, or should I go back to the drawing boards and research some new ETFs that are accumulating?




 

frugledoc

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Re: UK Investor?
« Reply #31 on: August 26, 2014, 12:49:40 PM »
In my ISA I prefer to keep the dividends on account and then when I get enough I buy a different share to diversify.

Nothing wrong with re-investing dividends into the pre-existing share though, or into a share that is not doing so well so you buy more units.

frugledoc

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Re: UK Investor?
« Reply #32 on: August 26, 2014, 02:13:15 PM »
There is no extra tax to pay on dividends for lower rate tax payers so it doesn't really matter if the are held inside or outside the ISA wrapper.

Main difference is capital gains tax protection from an ISA although if you are never going to sell this doesn't really matter.

Where will the foreign witholding taxes be with IWRD.  It is an ETF listed on the london stock exchange so there will be no further tax to pay on dividends for a lower rate tax payer?

Do you have firsthand experience of this? It's not where the ETF is listed, it's where it is domiciled. You do pay tax on dividends from all those ETFs, and they show up as Non-UK Equities. AFAIK there aren't any UK domiciled, FTSE 100 ETFs (strange as that sounds) - they are all Irish, Luxembourg, etc.

British *shares* won't attract more tax. But ETFs containing them will (even though there is no withholding!).

Eg:

Non-UK Equities
Pay Date    Quantity & Investment    Gross amount of chargeable payment ()    Foreign withholding tax paid ()    Net dividend paid ()
10 May 2013    125
HSBC ETFS PLC  FTSE 250 UCITS ETF    7.39    At 0.00%
0.00    7.39

So you'd pay 20%, as a lower rate taxpayer, on that 7.39

On the HSBC own page it says effective rate 0%   -    http://www.etf.hsbc.com/etf/attachments/uk/tax_residents.pdf

"   At what rate of tax are UK investors taxed on dividend
distributions from HSBC ETFs?
UK investors will be generally taxed as follows:
Lower and basic rate taxpayers 10% (effective rate zero)
Higher rate taxpayers 32.5% (effective rate 25%)
Additional rate taxpayers 37.5% (effective rate 30.56%)
The effective rate quoted above relates to the amount of UK
tax payable on the cash dividend paid by HSBC ETFs plc.
This is lower than the statutory rate because the dividends 
will carry a 10% tax credit for UK income tax purposes.   "

daverobev

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Re: UK Investor?
« Reply #33 on: August 26, 2014, 03:45:46 PM »
There is no extra tax to pay on dividends for lower rate tax payers so it doesn't really matter if the are held inside or outside the ISA wrapper.

Main difference is capital gains tax protection from an ISA although if you are never going to sell this doesn't really matter.

Where will the foreign witholding taxes be with IWRD.  It is an ETF listed on the london stock exchange so there will be no further tax to pay on dividends for a lower rate tax payer?

Do you have firsthand experience of this? It's not where the ETF is listed, it's where it is domiciled. You do pay tax on dividends from all those ETFs, and they show up as Non-UK Equities. AFAIK there aren't any UK domiciled, FTSE 100 ETFs (strange as that sounds) - they are all Irish, Luxembourg, etc.

British *shares* won't attract more tax. But ETFs containing them will (even though there is no withholding!).

Eg:

Non-UK Equities
Pay Date    Quantity & Investment    Gross amount of chargeable payment ()    Foreign withholding tax paid ()    Net dividend paid ()
10 May 2013    125
HSBC ETFS PLC  FTSE 250 UCITS ETF    7.39    At 0.00%
0.00    7.39

So you'd pay 20%, as a lower rate taxpayer, on that 7.39

On the HSBC own page it says effective rate 0%   -    http://www.etf.hsbc.com/etf/attachments/uk/tax_residents.pdf

"   At what rate of tax are UK investors taxed on dividend
distributions from HSBC ETFs?
UK investors will be generally taxed as follows:
Lower and basic rate taxpayers 10% (effective rate zero)
Higher rate taxpayers 32.5% (effective rate 25%)
Additional rate taxpayers 37.5% (effective rate 30.56%)
The effective rate quoted above relates to the amount of UK
tax payable on the cash dividend paid by HSBC ETFs plc.
This is lower than the statutory rate because the dividends 
will carry a 10% tax credit for UK income tax purposes.   "

Interesting! Seems like you're right, since '09 they've treated foreign dividends the same as local ones. When you do a tax return (if you have to), then it will all tally up magically - they'll give you a 10% credit which'll bring it back down to zero. You just put it all in foreign dividends and - magic - no more tax to pay.

http://boards.fool.co.uk/dividends-consolidated-tax-certificate-11559221.aspx?sort=whole

Not exactly obvious, but it sounds like the tax software bears it out.

daverobev

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Re: UK Investor?
« Reply #34 on: August 26, 2014, 03:49:16 PM »
I funded my account, and intended making my first purchase today.
However, I thought I'd check first that the four stocks were accumulating dividends, but it turns out they're not.

The lovely lady on the phone informed me that they pay out on set dates, but I can set up my ISA to automatically re-invest the dividends.
Is it sensible to set up my investment strategy this way, or should I go back to the drawing boards and research some new ETFs that are accumulating?

"It doesn't matter" - divis paid out and reinvested are pretty much the same as not paying them out and simply increasing the value of each share.

The only downside is that iWeb charge a fee to reinvest - I think it is 2%, up to a cap of 10 quid?

Assuming your choices pay out in similar times, I would keep the cash and then just use it to rebalance with your next planned purchase - no point giving them the 2%, or using more trades than you have to.

With ETFs (rather than mutual funds) you can't own fractions, so if you got 20 quid in dividends from one ETF and the price was 20.01, you would buy exactly zero new shares, and instead you'd have 20 left as cash.

happycat

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Re: UK Investor?
« Reply #35 on: August 27, 2014, 01:48:34 PM »
Ok, I'm just going to make a purchase to get over the whole "Oh this is scary making my first purchase" barrier I've got in my head.

I'll get back to understanding foreign dividends next week, but for now.....

All I'm going to make sure is that the bonds are in the ISA.
I'm only investing 100 in each this month so 420 altogether (with trading costs 5 each).

Next month I'll increase this amount, and iron out any wrinkles in my plan, but if I don't make this first move soon, I'm going to suffer with analysis paralysis.

I need to keep the momentum going, I can learn as I'm going.

Daverobev... I like how even though you know your stuff, you're not afraid to admit when you learn something new.  You're a character not an ego. :)

daverobev

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Re: UK Investor?
« Reply #36 on: August 27, 2014, 04:13:44 PM »
Ok, I'm just going to make a purchase to get over the whole "Oh this is scary making my first purchase" barrier I've got in my head.

I'll get back to understanding foreign dividends next week, but for now.....

All I'm going to make sure is that the bonds are in the ISA.
I'm only investing 100 in each this month so 420 altogether (with trading costs 5 each).

Next month I'll increase this amount, and iron out any wrinkles in my plan, but if I don't make this first move soon, I'm going to suffer with analysis paralysis.

I need to keep the momentum going, I can learn as I'm going.

Daverobev... I like how even though you know your stuff, you're not afraid to admit when you learn something new.  You're a character not an ego. :)

I'd suggest not making 4 x 5 purchases.. you'll pay far too much in commission. Ideally you want.. well, as little as possible, but I'd maybe do bonds every other month, and then maybe one of the stock ETFs on a rotating basis.

Otherwise you're basically losing 5% of your investment upfront, which is bad.

Thanks for the compliment, I am trying to be helpful rather than a know it all, and I certainly do not know it all :)

happycat

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Re: UK Investor?
« Reply #37 on: August 27, 2014, 04:46:35 PM »
I'd suggest not making 4 x 5 purchases.. you'll pay far too much in commission. Ideally you want.. well, as little as possible, but I'd maybe do bonds every other month, and then maybe one of the stock ETFs on a rotating basis.

So you mean if I buy (for example) 400 of just bonds tomorrow (total 405 with costs)

Then just buy  HUKX the next month, and just IWRD.L the month after that..and so on. In effect keeping my purchase cost down to 5 per month?


Once I've bought my experimental first lot, keep in mind over the next few months up until December 30th, I'll be putting 22500 into this, so that's 5600 a month up until December 30th, after that it will be 2400 per month until I retire.

2400/4 = 600 per purchase (605 including costs)

Four purchases a month = 20
per annum 240

With these figures, should I still worry about a 240 yearly trading cost?






daverobev

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Re: UK Investor?
« Reply #38 on: August 27, 2014, 06:49:45 PM »
I'd suggest not making 4 x 5 purchases.. you'll pay far too much in commission. Ideally you want.. well, as little as possible, but I'd maybe do bonds every other month, and then maybe one of the stock ETFs on a rotating basis.

So you mean if I buy (for example) 400 of just bonds tomorrow (total 405 with costs)

Then just buy  HUKX the next month, and just IWRD.L the month after that..and so on. In effect keeping my purchase cost down to 5 per month?


Once I've bought my experimental first lot, keep in mind over the next few months up until December 30th, I'll be putting 22500 into this, so that's 5600 a month up until December 30th, after that it will be 2400 per month until I retire.

2400/4 = 600 per purchase (605 including costs)

Four purchases a month = 20
per annum 240

With these figures, should I still worry about a 240 yearly trading cost?

Ok - sorry, 20 out of 5600 isn't so bad, I thought you would buy 400 a month - as 4 trades - 5 out of 100 is bad.

The general rule is trading costs < 1%. So roughly minimum 500 each trade. The more the better - in terms of an ISA that money is just gone, in a non-sheltered account the 5 gets added to the "adjusted cost basis" for the shares in that batch (if you buy 100 shares and they are 1 each, you actually pay 105 (plus stamp duty but don't worry about that) - your effective price for capital gains is 1.05 a share) - but the UK is more generous than most in that there is a capital gains allowance every year, tax free.

Trading costs in the UK are high (especially since iWeb got rid of regular investing, boo) vs Canada, where ETF purchases are free.. but what are you going to do.

In short - for 2400 a month you're fine, it's less than 1%, but if you wanted you could do bonds and IWRD one month, HMCX and HUKX the next... assuming it'll be over a longish period of time - 10 years - the fact you're only buying every other month won't matter much, and you'll save 120 a year.

happycat

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Re: UK Investor?
« Reply #39 on: August 29, 2014, 05:23:50 AM »
Just to confirm...
The IGLT.L are bonds, but in and ETF yeah?

Sorry I'm just a bit cautious placing my first trade.

And I've just read that Vanguard (VUKE) ETFs have had their costs dropped to 0.1. This is much lower than HUXK (0.3), but these are Irish domiciled just like HUKX

So why shouldn't I be investing in Vanguard ETFs since they have a lower cost ratio?

Talk about changing tack just at the last minuet, I don't like to make a habit of knee jerk reactions, but I need to check this?
« Last Edit: August 29, 2014, 07:36:55 AM by happycat »

daverobev

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Re: UK Investor?
« Reply #40 on: August 29, 2014, 08:41:37 AM »
VUKE's good. I had some for a while. It pays quarterly rather than twice a year, which can be nice in retirement. And yeah, cheaper is better.

I haven't seen anyone else with a FTSE 250 ETF so HMCX is it.

Looks like iShares UK are lowering their TERs too

http://www.ishares.com/uk/individual/en/campaign/core-series/ishares-core-series-ind

IGLT is 'gilts' which is the UK Treasury's bonds.

Hmm, ok iShares have some UK 'mid cap' and 'small cap' stuff.. they have a lot of stuff. But the thing is to get going. It's better to pay 0.1% than 0.3, but it is much much better to pay 0.3% than having money doing nothing.

STOCK AND BOND ETFs WILL go up and down. If you put 3k in today and next week it's only worth 2.5k... just keep investing, stick to your asset allocation.

Oh, and HSBC may well drop their prices else they'll lose investors.

happycat

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Re: UK Investor?
« Reply #41 on: September 01, 2014, 05:30:24 AM »
I just bought my first purchase.

420 of IGLT

I'll work out what to buy regarding international, FTSE100 and FTSE250 next month.

It did feel quite scary, but I've done the first one, so the subsequent trades should be less scary.
I have to overcome this fear because this needs to become a habit, and to develop a habit you need to be comfortable with it.

I'm just going to take a couple of days to let this sink in :D

daverobev

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Re: UK Investor?
« Reply #42 on: September 01, 2014, 07:53:26 AM »
Good for you! Just stick with it through the ups and downs.

frugledoc

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Re: UK Investor?
« Reply #43 on: September 01, 2014, 10:42:00 AM »
Hi Happycat,

Have you considered a fund like vanguard life strategy 80:20?


happycat

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Re: UK Investor?
« Reply #44 on: September 03, 2014, 08:29:56 AM »

Looks like iShares UK are lowering their TERs too
http://www.ishares.com/uk/individual/en/campaign/core-series/ishares-core-series-ind

Why is the TER for IWRD 0.5? That's pretty high isn't it?
http://www.hl.co.uk/shares/shares-search-results/i/ishares-plc-msci-world
Unless I buy into iShares Core fund then the TER drops to 0.07 or 0.25, is that what you're suggesting (that I buy into iShare's Core fund)?

And
When you say ......

VUKE's good. I had some for a while. It pays quarterly rather than twice a year, which can be nice in retirement. And yeah, cheaper is better.

I haven't seen anyone else with a FTSE 250 ETF so HMCX is it.

Do you think I should buy VUKE instead of HUKX and then switch back to HUKX if the price drops?
I get with the FTSE250 the only option really available to me is HMCX, would you agree?

daverobev

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Re: UK Investor?
« Reply #45 on: September 03, 2014, 09:11:26 AM »
You have to go with what you know right now. VUKE is cheaper than HUKX, they track the same index and are 'fully replicated' - there is no functional difference, go with what is cheaper.

0.5% is high relative to 0.1% sure, but you're getting a lot of hassle removed. I don't own any iShares stuff in the UK. Do some research, see if you can find something better for you - ie buying 2-3 ETFs at 0.2% rather than 1 at 0.5% - question is, how much hassle is it? That's your call.

For example in Canada there is now a VXC ETF - Vanguard, world excluding Canada - about 50% US, 35% developed, 15% developing. You can buy the underlying bits for 1/3 the MER, and actually potentially slightly better tax-wise, but for people who just need to get going - one ETF to buy? Awesome!

How much time do you want to spend looking at stuff? What you have chosen is 'good enough' - not perfect, but good enough, and a million times better than doing nothing for another week... month... year... Right?

happycat

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Re: UK Investor?
« Reply #46 on: September 05, 2014, 10:25:47 AM »
Ok next I'm going to buy HMCX FTSE 250

Hoping to buy 600 worth and keep this lot OUT of the ISA.

I'm not exactly sticking to my diversification ratio at the moment, I'm just getting used to how the buying process works, and where to place them.

Cripes! I still need to work out what FTSE100 and Global ETFs to buy :S


frugledoc

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Re: UK Investor?
« Reply #47 on: September 05, 2014, 03:09:57 PM »
Haven't compared the charges but for FTSE 250 I use Ishares ETF - MIDD.

I assume you are buying outside an ISA because you have maxed out your allowance?   If you have enough money to max out your ISA then you are buying in too small chunks of money.  A lot of your gains will be eaten up by trading costs.  I would recommend 2k per purchase, unless you are doing a bit of fun purchase like buying russia.
« Last Edit: September 05, 2014, 03:12:18 PM by frugledoc »

happycat

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Re: UK Investor?
« Reply #48 on: September 09, 2014, 06:43:49 AM »
Haven't compared the charges but for FTSE 250 I use Ishares ETF - MIDD.

I assume you are buying outside an ISA because you have maxed out your allowance?   If you have enough money to max out your ISA then you are buying in too small chunks of money.  A lot of your gains will be eaten up by trading costs.  I would recommend 2k per purchase, unless you are doing a bit of fun purchase like buying russia.

The charges for HMCX FTSE 250 are lower.
Correct. I will be maxing out my ISA with gilts and FTSE 100 ETF's by the end of the year. As discussed in previous post FTSE 250 and Global ETFs can stay outside the ISA.

You're right I do need to be buying bigger purchases, I'm just getting over some psychological barriers at the moment. I'm going to be increasing the size of purchases in the near future.
« Last Edit: September 09, 2014, 06:46:07 AM by happycat »

happycat

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Re: UK Investor?
« Reply #49 on: September 11, 2014, 06:50:14 AM »
Urrrrghh!!

I just bought 1087.00 of HMCX FTSE250 ETF and am holding them in my CMA account. (Outside the ISA)

I'm really sorry to drone on about every single trade I make, but for me this is scary stuff.
 
I guess I kind of want someone to point out if I'm doing anything obviously wrong with the basics of my investing strategy. Once I get comfortable with this, I promise you'll hear less from me.

Thanks for all your input guys. I appreciate it. 

Next I'll research those pesky Global ETF's and make a decision!!!