Dividend Income

dont_use_vistaprint

Other than create / buy a profitable company, how do I invest to get dividend income to save tax ?

What would be a realistic goal e.g monthly or quarterly income per £10k invested.

Are there specific platforms or bonds designed for dividend income rather than growth ?

AnotherJoe

The phrase "dont let the tax tail wag the dog" comes to mind. You may well be much better off getting growth thats taxed (especially if its under CGT limits so zero tax anyway) than not paying tax on (say) half as much in dividends.

Yes there are many funds designed for dividend income rather than growth. You will find that by and large they produce a lower overall gain than general funds or indeed growth funds. If you search on a platform like HL (not recommending it it just has good free search capabilty) you can look for income funds. There are thousands. And there are IT's whose main aim is to produce dividends, as well as ETFs.

Anything much more than 5% is pushing it. The current yield on the FTSE100 is about 4.5% I think.

Do you max out your ISA contributions? Growth from any source, gains or dividends, are non taxable within an ISA.

Linton

To get dividends you buy shares in companies that pay dividends or buy funds which own shares in possibly hundreds of companies. In my view it is not worthwhile buying individual shares unless you have at least £50K because you need to buy into say 15 companies or more to provide reasonable protection against one going bust or simply decreasing their dividends. Holding small quantities of shares in each company adds disproprtionately to costs and management effort.



You can get funds that pay 7%/year or more in dividends but the downside is that you are unlikely to get much, if any, capital growth. It is quite possible that you wont match inflation and could even lose money over the long term. So it may be better aiming at 4.5-5% (£37-£42/month per £10K invested) . Also there are also funds that pay interest rather than dividends with similar returns.



I agree with AnotherJoes comments - keeping such funds in ISAs is very beneficial and also avoids hassles with tax returns. It would not be a good idea to put all your money into dividend/interest generating funds as the companies that pay good dividends may not provide the best total returns if you add the dividend and the capital growth. On the other hand dividends tend to be more consistent over time than capital growth. I would advocate having a mixture of income and growth investments. How you do this depends on how much money you have.

Arazan

You can earn £2,000 PA from dividends without them being in an ISA and without paying any tax, no matter what your income band is.