Most tax efficient investment income?
Comments
-
Thank you everyone.
It is now very clear that I should try to use all capital gains in taxable investments and take tax free allowance income from SIPP. Take tax free gains and put them in the ISA, then (if I want) I can withdraw the equivalent from the ISA tax free.
But can anyone explain, after I have used up all tax free allowances for income and capital gains, if I want to withdraw any more, am I right in thinking I can withdraw £5,400 (dividend income amount) from the share dealing account without paying any income tax at 20% on it? So long as my total income (including the dividend withdrawal itself) does not go over the basic rate band of £45,000 I will only pay 7.5% tax on the dividends.
It seems to make more sense to withdraw the dividend income at 7.5% tax rate than leave it invested and, say, withdraw £5,400 more money from the SIPP and pay 20% tax on it.
I should have made clearer in the first post that what I wanted to try to achieve was an annual income of up to £45,000 (staying in the Basic Rate band) by withdrawing from my investments (SIPP, share dealing, P2P) at the lowest possible tax on £45,000. I excluded the fact I could make tax free withdrawals from the ISA because I am trying to confirm the most tax effcient order and how much to withdraw from the taxable investments .0 -
But can anyone explain, after I have used up all tax free allowances for income and capital gains, if I want to withdraw any more, am I right in thinking I can withdraw £5,400 (dividend income amount) from the share dealing account without paying any income tax at 20% on it?
Yes.
Something to be clear about is that withdrawals from your SDA are never taxed. It's the dividends, and the capital gains from selling, which are taxed.
That's kind of the mirror image of your SIPP. In the SIPP, dividends and capital gains aren't taxed, but (as we were saying on early posts) your withdrawals are taxed.0 -
So long as my total income (including the dividend withdrawal itself) does not go over the basic rate band of £45,000 I will only pay 7.5% tax on the dividends.
Remember the £2,000 nil-rate band for dividends too. So if your SDA dividends are £5,400 in a tax year, your tax is 7.5% of £3,400 = £255.0
This discussion has been closed.
Categories
- All Categories
- 342.2K Banking & Borrowing
- 249.8K Reduce Debt & Boost Income
- 449.3K Spending & Discounts
- 234.4K Work, Benefits & Business
- 606.7K Mortgages, Homes & Bills
- 172.7K Life & Family
- 247.2K Travel & Transport
- 1.5M Hobbies & Leisure
- 15.8K Discuss & Feedback
- 15.1K Coronavirus Support Boards