Dividend Tax Allowance £2000

boxedin

I am thinking of investing in shares to take advantage of this allowance. As I understand it everyone gets a £1000 savings allowance and a £2000 dividend allowance after which dividends are taxed at 8.75%. ISA's get dividend tax free

FIrstly what are qualifying investments. I understand this excludes investment trusts. unit trusts.OEiCS, Gilts obviously  but what else eg REITS I am guessing its just uk listed shares but what if they are overseas based.  

Secondly I understand that in the fortunate event that I generate more than 2K the chancellor recently reduced the dividend tax tback down to 7.25% from April 23 is this correct

Is  anyone else doing  the same thing or is it too risky for the benefit over paying 20% tax on a fixed rate saving. as income shares could move down as interest rates rise over the next couple of months 

MX5huggy

Have you filled your ISA? 

Used you Pension Allowance up? 

Dividends from Investment Trusts etc are eligible for dividend tax. You want to hold the income units not the accumulation units to keep easy track of your dividends. 

Then watch CGT liability growing. 

Dazed_and_C0nfused

boxedin said:

I am thinking of investing in shares to take advantage of this allowance. As I understand it everyone gets a £1000 savings allowance and a £2000 dividend allowance after which dividends are taxed at 8.75%. ISA's get dividend tax free

FIrstly what are qualifying investments. I understand this excludes investment trusts. unit trusts.OEiCS, Gilts obviously  but what else eg REITS I am guessing its just uk listed shares but what if they are overseas based.  

Secondly I understand that in the fortunate event that I generate more than 2K the chancellor recently reduced the dividend tax tback down to 7.25% from April 23 is this correct

Is  anyone else doing  the same thing or is it too risky for the benefit over paying 20% tax on a fixed rate saving. as income shares could move down as interest rates rise over the next couple of months 

It's not an allowance as such but a 0% tax rate.

The £2,000 is still taxable income and forms part of your adjusted net income so even if you pay 0% tax on the dividend income it can increase any High Income Child Benefit Charge payable or reduce your Personal Allowance (ANI > £100k).

It rare cases it also makes you ineligible for Marriage Allowance.

None of which may be relevant to you but they are to some.

boxedin

Thanks MX Shuggy

ISA cash in the process of investing and added this years 20k. 

Pension have a Sipp and am can only add a small amount each year into my SIPP £3600 gross because I am retired and drawing final salary pension (not a huge amount).. Looking at adding gilts over the coming months to my isa/sipp

Your point about investment trusts helps as that spreads risk will look into that one. I am assuming that if I make capital gains I can use the tax relief on CGT of 12.5k per annum .either way.

 

Thanks Dazed and confused, I dont get any benefits or allowances because of my pensions. but its worth knowing..

InvesterJones

boxedin said:

Is  anyone else doing  the same thing or is it too risky for the benefit over paying 20% tax on a fixed rate saving. as income shares could move down as interest rates rise over the next couple of months 

I think the decision to invest in equities should be made based on a number of reasons such as risk appetite and investing time scale, which probably should hold more weight than the availability of a dividend allowance. Get advice.

One tip though if concerned about the impact of tax on savings interest of fixed savings is to look for a fund which invests in bonds but pays out dividends. (Though note, risk profile of bonds is not the same as savings).

wmb194

InvesterJones said:

boxedin said:

Is  anyone else doing  the same thing or is it too risky for the benefit over paying 20% tax on a fixed rate saving. as income shares could move down as interest rates rise over the next couple of months 

One tip though if concerned about the impact of tax on savings interest of fixed savings is to look for a fund which invests in bonds but pays out dividends. (Though note, risk profile of bonds is not the same as savings).

You need to be careful with these, though. If they're domiciled overseas - which includes Jersey and Guernsey - and invested in >60% in interest bearing assets their dividends need to be declared instead as foreign interest.

"...interest from overseas unit trusts and other investment funds, including from reporting offshore funds (use the details on your unit trust or fund voucher) – where the offshore fund is more than 60% invested in interest bearing assets, any distribution that you receive, or that is reported to you, is treated as interest received"

https://assets.publishing.service.gov.uk/government/uploads/system/uploads/attachment_data/file/1062228/sa106-notes-2022.pdf