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[Deleted User]

Linton wrote: »

I dont think you are going to get very far arguing with a UK investor on a UK website about UK taxation. I suggest you study https://www.gov.uk/capital-gains-tax,

In summary and not going into the details:

In the UK Capital Gains (investment funds, company shares, real estate (except ones own home), precious stones, bitcoins etc ) are generally taxed on the same basis. The gain is simply and solely the difference between the cost of the item and the amount you sell it for minus costs. There is an annual allowance, currently £11700 for the total of all realised capital gains in a tax year. Any realised gains above the allowance are taxed at rates depending on what other taxable income you have. The rates for residential property are different to other things.

There is some room for tax avoidance in that it can be worthwhile to realise sufficient capital gain each year to ensure your annual allowance is fully used. It is not quite as easy as that since if you sell and buy the same investment within a month the transaction is ignored, but there is nothing to prevent you selling one tracker and buying an identical one from a different fund manager for example.

However if you have say £2M invested outside a tax protected environoment this is not going to help a lot.

The world outside the US can be very different to what most US residents simply take for granted.

I am not in the US. The website you linked says that capital gains are due on selling assets. The link says nothing specific about selling assets held within a wrapper, such as selling shares held within unit trusts or ETFs. Elsewhere, they indicate that if turnover in the fund is small compared to the overall value, they don’t charge tax on such capital gains. They don’t define “small”.

Linton

Deleted_User wrote: »

I am not in the US. The website you linked says that capital gains are due on selling assets. The link says nothing specific about selling assets held within a wrapper, such as selling shares held within unit trusts or ETFs. Elsewhere, they indicate that if turnover in the fund is small compared to the overall value, they don’t charge tax on such capital gains. They don’t define “small”.

Unit trusts and ETFs are not normally classed as "wrappers", they are classed as assets in their own right. Wrappers are things like ISAs, Pensions, and Investment bonds which are purely repositories for other assets with tax advantages but do not of themselves take part in wealth generation. It is difficult to find a reference which says that you dont pay tax on fund internal buys and sells, I guess because no-one without US experience would think you did. However see http://www.davidburnell.co.uk/unit-trusts.htm where it states:

Unit trusts and OEICs are not liable for Capital Gains Tax (CGT) on internal realised gains. This allows the fund managers to trade in and out of shares without having to worry about the tax implications.
Investors in a trust, however, are liable for CGT on gains they make when they sell their units (or shares in the case of an OEIC).

One question you may wish to consider is how would a UK investor know what the internal gains and losses oin his funds were when this information is not provided to unit holders by funds?


Should you be giving advice to newbie investors when you dont understand something as basic as CGT?

noh

Capital gains within unit trusts/OEICS as already stated are not subject to CGT.

Link to a relevant page in HMRC manual
https://www.gov.uk/hmrc-internal-manuals/capital-gains-manual/cg41572

A link to the legislation
https://www.legislation.gov.uk/ukpga/1992/12/section/100/enacted

TBC15

Deleted_User wrote: »

If it were true, it would be a very straightforward mechanism for tax avoidance. I am pretty sure that Morningstar is correct and that capital gains distributions are in fact added to your tax liability (in taxable accounts).

you are wrong, move on.

Terron

AlanP wrote: »

Spending that £1m on 4/5 BTL properties would probably earn you £40/50k a year as opposed to costing you that - Buy Assets not Liabilities.

I spent ~£420k on 7 properties and made ~£30k last year. I have also been getting capital growth. BTL could certainly work for producing an income.


However, I had some luck. I grew up in an area suitable for investing in BTL for income, and I still had a contact their who helped me get started, particularly in recommending good advisors.


I pay for full management of the properties, but still need to do a little work - mainly accounts and choosing properties. It is not total retirement (though my sisters would say it is close enough as makes no difference),.


I also have more money in my pensions than my properties.

SB1961

It is difficult to answer your question without knowing more information. Probably the main one would be what is your risk appetite, as the more risk you are prepared to take, potentially the more income you might gain but in reverse when markets are suffering, potentially the more you have to lose.


I have been fortunate with investments and inheritance and have invested, by coincidence c£2m, which is a combination of pensions and savings and in the last 3 years this has produced growth of 24.92% and income of 2.70% (£53,000).


The investments are deliberately structured for a combination of growth and income rather than one or the other but at present with a bias towards growth. As I get towards retirement I will change the bias towards income to replace salary.


If I structured my investments more towards income then I would be aiming at a minimum of 3% to 4% (£60,000-£80,000) per annum. However, if I wanted to put "more eggs into a smaller number of baskets", which I would have to consider very carefully, then I would aim to achieve income of 5%-6% (£100,000-£120,000).


What are my investments ?


I invest in a relatively small number of funds, trusts & bonds totalling around about 12 that I have thoroughly researched. The main ones include the likes of Fundsmith Equity, Lindsell Train Global Equity and Scottish Mortgage, amongst others. My growth investments are however rather skewed, as my investments are weighted to one investment in particular, which is Fundsmith which accounts for 38% of my investments. This is a "lot of eggs to put into one basket" but this investment has grown by 86% in the last 3 years. It is an investment that I have a particular attraction to as it has consistently performed well (that's not to say that it always will of course) and the fund manager, Terry Smith, has taken a "leaf or two" with his investment strategy from Warren Buffet.


So in summary, income of 3%-4% (£60,000-£80,000) should be reasonably achievable with £2m with a good mix of investments and without eroding your capital. With the right investments, growth should be possible too.


However there will always be ups and downs over the years with investments, simply reflecting the market volatility. Not every investment will necessarily work out as you had hoped and there will inevitably be some years where your income is less than previous years, as the yield from a particular investment fluctuates.

bostonerimus

38% is quite a bit to have in one Fundsmith basket.....and it's s small basket too.

SB1961

bostonerimus wrote: »

38% is quite a bit to have in one Fundsmith basket.....and it's s small basket too.

I agree that 38% is quite a bit (albeit it is relative) but disagree it's a small basket but of course that's personal opinion.

Fundsmith is a large fund of c£17.5 billion investing in various companies, so it's not like investing in one company. Within the fund there are c25+ companies including the likes of Amadeus, Estee Lauder, Facebook, Microsoft, PayPal, etc and in various countries including the USA, UK, Denmark, Spain, etc. The fund provides a good spread of risk.

I would never invest more than 20% of my total wealth (house, assets, savings & pensions) into any one investment and generally use a rule of thumb of no more than 10% and I never buy shares in individual companies.

darkidoe

amazon1234 wrote: »

What income could a married couple expect to receive from £2 million pounds invested? We're quite young so would need the £2 million to increase over time.

Work out what you need to live. If you can reduce what you need, and generate more than that with that 2 million. You are set for life.

fifeken

Deleted_User wrote: »

I am not in the US

Are you in/from the UK? Your knowledge/comments do not indicate that, which is what other posters seem to have picked up on I think.