Say person A has investment income of 100k per year. He pays someone 1% of capital to manage / look after it (say 20k). Can this be tax deducted as an expense from investment income? (effectively making it 80k).
If not, is there a way to structure the investments so that it can be done?
Thanks in advance!
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Can investment fees be deducted from investment income somehow?
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- Lemon Pip
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- Lemon Half
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Re: Can investment fees be deducted from investment income somehow?
valueinvestor123 wrote:If not, is there a way to structure the investments so that it can be done?
If you hold your taxable assets in the form of OEICs or even ITs, you are taxed on the net distribution. Make sure they aren't taking charges and expenses from capital though.
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- Lemon Pip
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Re: Can investment fees be deducted from investment income somehow?
The investments are held in shares/bonds. Then the commission is paid to the person that is managing the investments. Can this not be deducted on the return from investment income?
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- Lemon Half
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Re: Can investment fees be deducted from investment income somehow?
valueinvestor123 wrote: Then the commission is paid to the person that is managing the investments. Can this not be deducted on the return from investment income?
I believe the answer to be no, for an individual anyway. Companies can do it.
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- Lemon Half
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Re: Can investment fees be deducted from investment income somehow?
valueinvestor123 wrote:The investments are held in shares/bonds. Then the commission is paid to the person that is managing the investments. Can this not be deducted on the return from investment income?
Sadly not.
Here’s a randomly found discussion as a source:
https://www.accountingweb.co.uk/any-answers/deductible-expenses-from-investment-income
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- Lemon Pip
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Re: Can investment fees be deducted from investment income somehow?
Thanks. And there is no way to structure it in a way that can be more tax efficient and somehow get the deduction for the management fee or admin costs associated with running the account? (By keeping it in shares rather than selling and buying funds).
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- Lemon Slice
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Re: Can investment fees be deducted from investment income somehow?
valueinvestor123 wrote:Say person A has investment income of 100k per year. He pays someone 1% of capital to manage / look after it (say 20k). Can this be tax deducted as an expense from investment income? (effectively making it 80k).
If not, is there a way to structure the investments so that it can be done?
Thanks in advance!
I feel the same way. Years ago, when brokers introduced management fees (as well as commission on deals), my accountant would agree with deducting the management fees, but subsequently and quite a long time ago, he advised against doing it.
Dealing costs have always been deductible (on CGT).
If you consider a model where brokers charge a mixture of management fees (e.g. as a % of value of stocks held) and dealing fees (only chargeable on a deal), you can generally find brokers offering a mix of those to suit your taste/needs, ranging from all commission and no management fee all the way to all management fee and no dealing fee.
I suppose you could opt for all dealing fees (and no management fee) which would be offset against CGT where applicable (assuming you could find a broker willing to offer that rate), but it might be an incentive for the broker to churn.
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- Lemon Pip
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Re: Can investment fees be deducted from investment income somehow?
I think I read somewhere that businesses can deduct this. Which is weird. Why distinguish between businesses and individuals I wonder.
I guess when it comes to taxes, using logic is futile...
I guess when it comes to taxes, using logic is futile...
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