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Investments after utilising ISA allowance etc

Practical Issues
WorcesterPark
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Investments after utilising ISA allowance etc

#469243

Postby WorcesterPark » December 30th, 2021, 5:45 pm

Hi
What would be sensible tax efficient investments for higher rate tax payers who have utilised their annual ISA allowances/pension annual allowance etc, and still have excess cash to invest? Not too risky or complex.
What about investments which are subject to eventual CGT rather than dividends? Are there investments which target long term capital growth at the expense of dividends?
Was thinking about funds where income is ‘rolled up’ into your accumulation units but this income seems to be treated the same way as dividend income rather than capital.

Thanks for any help!
WP

swill453
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Re: Investments after utilising ISA allowance etc

#469247

Postby swill453 » December 30th, 2021, 5:52 pm

A "growthy" Investment Trust might do the job. SMT (Scottish Mortgage Trust) is one, but there are others.

Or a simple world tracker like VWRL from Vanguard, current yield is less than 1.5%.

You're right to avoid accumulators in non-tax-sheltered accounts, they're quite hard to manage.

Scott.

Lootman
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Re: Investments after utilising ISA allowance etc

#469272

Postby Lootman » December 30th, 2021, 7:04 pm

I have been in this situation for many years. I broadly do as Scott suggests and hold low or no yielders in my taxable account. This can include growth shares and growth funds. Berkshire Hathaway is a favourite as it hasn't paid a dividend in decades and probably won't whilst Buffett is alive. But buy the B shares as the A shares are $450,000 each!

That way the only material tax issue is CGT and that is usually something you can control. You can make sales that utilise your annual CGT-free allowance and no more. Some folks like to wait until the end of the tax year to do that to avoid the risk of mandatory corporate actions that may generate unwelcome capital gains. You can also harvest losses each year to effectively increase your CGT-free annual allowance.

Some types of securities are "messy" for tax purposes when held in a taxable account. For example foreign securities have to be reported separately on your tax return. ETFs may produce excess reportable income that is not reported, so requires care. Partnerships make distributions that consist of several different kinds of cashflow and are tricky to report. And avoid accumulation funds for the reason previously cited.

Also note that under current CGT rules the cost basis of your taxable positions are uprated upon death to the market value at the time of your demise, which is good. On the other hand there will probably be 40% IHT to pay on their value.

doug2500
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Re: Investments after utilising ISA allowance etc

#469278

Postby doug2500 » December 30th, 2021, 7:37 pm

Another nice trick is that you can sell one index tracker and buy another tracker of the same index but from a different provider to use CGT allowance while staying invested in the same thing. Hope that makes sense.

Kantwebefriends
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Re: Investments after utilising ISA allowance etc

#469301

Postby Kantwebefriends » December 30th, 2021, 9:33 pm

Gold sovereigns post-1837 are free of CGT. You can even buy them from the Royal Mint and store them in their vaults. There are also commercial outfits that offer sale and storage (often cheaper than the RM).

If you want such-and-such a %age of your portfolio on gold this is a pretty good opportunity.

PhaseThree

Re: Investments after utilising ISA allowance etc

#469308

Postby PhaseThree » December 30th, 2021, 9:57 pm

Depending on what your tax profile is you will want to make best use of both your Capital Gains Tax allowance and your Dividend Tax allowance.
Buy a common ETF of you choice - (VUKE, VEVE). Next year sell and invest in a very similar ETF (ISF, IWRD), pocket any Capital gains and dividends .
Repeat and smile.

mutantpoodle
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Re: Investments after utilising ISA allowance etc

#469344

Postby mutantpoodle » December 31st, 2021, 8:32 am

Its not exciting but Premium Bonds are 100% safe and...in theory, pay out about 1% a year more if you are lucky
totally tax free and no need to declare anywhere, (well not until IHT kicks in)

StayinAlive
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Re: Investments after utilising ISA allowance etc

#469495

Postby StayinAlive » December 31st, 2021, 9:22 pm

Have you thought about zero divdend preference shares? There are currently 13 or 14 in the market with maturity dates ranging from Sep 2022 to 2028.
As an example the NBPP will give around 2.9% gain in 9 months (so only capital gain).
Some are safer than others so DYOR.
https://www.theaic.co.uk/aic/find-compa ... -analytics

WorcesterPark
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Re: Investments after utilising ISA allowance etc

#470985

Postby WorcesterPark » January 6th, 2022, 8:29 pm

Many thanks all for your very helpful replies - much appreciated.

I think initially I will look at investment trusts which focus predominately on capital growth - so the likes of Scottish Mortgage Trust, Allianz Technology Trust, Baille Gifford US Growth Trust, BlackRock Greater Europe Investment Trust, Pacific Horizon, Aberdeen New India, Edinburgh Worldwide Investment Trust, etc. And then as doug2500 and others suggest, realise any gains up to CGT allowance and reinvest in similar seems like a good tactic. I plan to invest through the Fidelity Investment Account platform.

One observation at the moment is that they all seem to have had very healthy returns over the last 5 years or so (especially those with exposure to U.S), so might be due a correction, but hopefully in the long run will continue to be good investments...

Thanks for mentioning ZDP's StayinAlive - yes, I've thought about these in the past, but been put off a bit by doubts about their safety - think I will stick to the investment trusts for now, but will keep an open mind.

Thanks again all!


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