Tax free dividend allowance 2016

bigadaj

Just wondered if the £5k tax free allowance on dividends was going to change people's investment plans.

It would certainly help with unwrapped investments within income focuses portfolios and still being moderately cash heavy is something I'll be looking to utilise going forward.

george4064

Fortunately/unfortunately (however you look at it) all my investments are in an ISA, so this doesnt affect me at all. Maybe in the future I will be able to utilise this new dividend allowance, but I don't think that will be anytime soon.

kidmugsy

Given that interest rates on current accounts and regular savers are currently much higher than ISA rates, it may be the interest allowance that will be of more interest to many people, rather than the dividend allowance.

Archi_Bald

Never mind the dividend allowance - an ISA also protects you from CGT, and from having to declare your investments to the HMRC. Similar applies to a SIPP. Wrapped is always preferable to unwrapped, IMHO.

bigadaj

Not sure whether I wa unclear or everyone is being obtuse.

The interest and dividend allowance are obviously separate things, and use of an Isa for stocks and shares would normally be the first option. However the dividend allowance should mean that dividends from £100k plus of investments will be tax free. Well above isa allowances, without the restrictions of pensions. Decent saving for higher rate taxpayers I would have thought.

bigfreddiel

bigadaj wrote: »

Not sure whether I wa unclear or everyone is being obtuse.

The interest and dividend allowance are obviously separate things, and use of an Isa for stocks and shares would normally be the first option. However the dividend allowance should mean that dividends from £100k plus of investments will be tax free. Well above isa allowances, without the restrictions of pensions. Decent saving for higher rate taxpayers I would have thought.

Very confusing, what has £100k got to do with things other than at 5% this is an easy example of £5k divi. As it is I have well over £100k in my ISA portfolio.

Everyone knows the ISA allowance is £15k so it would take about 7 years to rack up £100k

Cheers fj

chucknorris

bigadaj wrote: »

Just wondered if the £5k tax free allowance on dividends was going to change people's investment plans.

It would certainly help with unwrapped investments within income focuses portfolios and still being moderately cash heavy is something I'll be looking to utilise going forward.

It's a good point, it won't change my plans as I already earn more than £5k in dividend income, but it has woken my wife up to the fact that she needs to ensure that she takes advantage and use this allowance annually, and she has therefore invested more in shares. It is free money for those that don't currently invest.

talexuser

For someone who is ISAed and SIPPed to the maximum, and has cash spare for an unwrapped investment, it will be considered I think.

The problem with 100k giving 5K of dividends a year would seem to be CGT. In that case you would need to choose say 2 good investment trusts with long term records, invest in one, and sell and buy the other as soon as capital is 11k up? (to give a little safety margin for trading) then when the second grows 11k sell and buy back the first...? Hope they don't grow too much every year?

bigadaj

bigfreddiel wrote: »

Very confusing, what has £100k got to do with things other than at 5% this is an easy example of £5k divi. As it is I have well over £100k in my ISA portfolio.

Everyone knows the ISA allowance is £15k so it would take about 7 years to rack up £100k

Cheers fj

Thanks Freddie, you're definitely obtuse, to put it politely.

bigadaj

talexuser wrote: »

For someone who is ISAed and SIPPed to the maximum, and has cash spare for an unwrapped investment, it will be considered I think.

The problem with 100k giving 5K of dividends a year would seem to be CGT. In that case you would need to choose say 2 good investment trusts with long term records, invest in one, and sell and buy the other as soon as capital is 11k up? (to give a little safety margin for trading) then when the second grows 11k sell and buy back the first...? Hope they don't grow too much every year?

Yes I'm considering looking at investment trusts and might even give hl a go for these given their maximum fee for holdings.

It would be wise to utilise gains to use up the cgt allowance, but it's not as though you pay tax if the gain isn't crystallised. So even if you get a good year and exceed the £11k allowance, you can just sell up to the allowance, and utilise the remainder the following year or later when markets haven't performed so well.

colsten

talexuser wrote: »

The problem with 100k giving 5K of dividends a year would seem to be CGT.

I agree, you'd need to keep an eye on CGT. Although if you were lucky enough to have your unwrapped £100K+ investment grow by over 11% each year, you'd probably not whinge too much about a bit of tax on the gains.

The dividend allowance makes no difference to my priority - which is maxing ISA and SIPP allowances each year.

bigadaj wrote: »

However the dividend allowance should mean that dividends from £100k plus of investments will be tax free.

I don't get that. You seem to be assuming that you get 5% divi for £100K, a declining %age thereafter? And why should dividends for less than £100K not be tax free?