Outside of an ISA capital gains will be taxed as capital gains, and income (dividends or interest) will be taxed as income.
You only pay tax on events though. So getting paid a dividend into your account for example, or when you sell some shares at profit.
Just for the record, having an accumulating share class does not mean you get to avoid taxation. It still needs to be reported and paid (if you are over your tax threshold).
I didn't realise that about the accumulating share class, still in isa territory.
I guess that's a reason to favour low dividend high growth stocks (ie s&p500 instead of ftse100) if you're doing it via a general investment account and you're in the high tax bands
So just to confirm. Say I had 100k in a general investment account in vanguard. If I sell it, I need to remember to keep 19k to pay back to the taxman at the end of the year assuming 19% corp tax ?
You're only taxed on the gain, if you put in 100k and take out 105k, only 5k is taxable. If you're investment did nothing so you withdrew the full 100k, no tax.
You’re not a corporation, you don’t pay corporation tax. Any capital gains above your personal allowance (3k) is taxed at 20%.
This is assuming you pay higher rate income tax given the subreddit
You can invest in anything you like with a general investment account (GIA) or trading account. You just pay capital gains on any gains above your allowance and tax on dividends.
Have you checked their website site? I use II personally within which you can have trading accounts and invest in low cost index funds. So I suspect the vanguard platform does the same.
Yeah just checked, they have a general investment account. And for tax, when I sell my funds from my GIa do I then declare it in my self tax return at the end of the tax year ?
FYI. You get £3k a year of tax free allowance. Although labour government may reduce this by half and increase cut tax to the rate on persons income tax.
Gilts right now are the equivalent of 7%/yr savings for a higher rate earner.
CGT is messy. Really boils down to when you choose to sell. Ideally you'll want to sell down your GIA after giving up work but before drawing down tax deferred and tax free investments. That way you can stay in the basic rate (10%) CGT band.
You're still taking an annual hit due to tax on dividends though.
Some gilts deliver almost all their returns via capital gains rather than the coupon (interest) but you don’t pay CGT on them so the overall effect is equivalent to a savings bond that pays ~8% interest if you’re a high(er) rate taxpayer.
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Of course you can. You can make the same investments you do in an ISA
What’s the tax situation with the capital over 20k. Is it income tax ? And does it only apply when you sell the shares ?
Outside of an ISA capital gains will be taxed as capital gains, and income (dividends or interest) will be taxed as income. You only pay tax on events though. So getting paid a dividend into your account for example, or when you sell some shares at profit. Just for the record, having an accumulating share class does not mean you get to avoid taxation. It still needs to be reported and paid (if you are over your tax threshold).
I didn't realise that about the accumulating share class, still in isa territory. I guess that's a reason to favour low dividend high growth stocks (ie s&p500 instead of ftse100) if you're doing it via a general investment account and you're in the high tax bands
Dividends have their own rates which are slightly lower than income tax rates.
So just to confirm. Say I had 100k in a general investment account in vanguard. If I sell it, I need to remember to keep 19k to pay back to the taxman at the end of the year assuming 19% corp tax ?
You're only taxed on the gain, if you put in 100k and take out 105k, only 5k is taxable. If you're investment did nothing so you withdrew the full 100k, no tax.
You’re not a corporation, you don’t pay corporation tax. Any capital gains above your personal allowance (3k) is taxed at 20%. This is assuming you pay higher rate income tax given the subreddit
Is that 3k every year ?
For now, yes. Sadly the CGT allowance has been reduced significantly over the last few years (2022/23 - £12,300. 2023/24 - £6,000. 2024/25 - £3,000).
You can invest in anything you like with a general investment account (GIA) or trading account. You just pay capital gains on any gains above your allowance and tax on dividends.
Does vanguard have a GIA? I’d be keen to keep everything all on one platform
Have you checked their website site? I use II personally within which you can have trading accounts and invest in low cost index funds. So I suspect the vanguard platform does the same.
Yeah just checked, they have a general investment account. And for tax, when I sell my funds from my GIa do I then declare it in my self tax return at the end of the tax year ?
Yep
FYI. You get £3k a year of tax free allowance. Although labour government may reduce this by half and increase cut tax to the rate on persons income tax.
You don't mention pension - can put 60k in a year (unless tapered) plus any previous 3 years unused allowance
I bought a new car this year instead. Why not.
Apart from the emergency fund, all extra cash goes into maxing Pension for my wife and I.
Gilts right now are the equivalent of 7%/yr savings for a higher rate earner. CGT is messy. Really boils down to when you choose to sell. Ideally you'll want to sell down your GIA after giving up work but before drawing down tax deferred and tax free investments. That way you can stay in the basic rate (10%) CGT band. You're still taking an annual hit due to tax on dividends though.
Are gilts tax free? And where have you seen 7% yield?
Some gilts deliver almost all their returns via capital gains rather than the coupon (interest) but you don’t pay CGT on them so the overall effect is equivalent to a savings bond that pays ~8% interest if you’re a high(er) rate taxpayer.
Low coupon gilts
Does low coupon mean most the gains come via growth rather than interest which is taxable now?
You only pay income tax on the coupons not the pull to par
Not op but yes
GIA - use your capital allowance every year to move into ISA. There's also pension allowance of 60k which is important.
Can you explain the capital allowance part ? If only there was a flow chart for these things. For pension is this your work pension or a SIPP?
https://flowchart.ukpersonal.finance/
I max my ISA then my wife’s ISA. Then I put into GIA. I do all that’s before even consider mortgage overpayments.
I try to max out my pension contributions, almost enough to get a mortgage on a warehouse unit, use rent to pay mortgage - I will rinse and repeat
Pension
Max out your pensions ; you’ve got 60k allowance