INVESTMENTS 6: Taxation

Here's a breakdown of key tax considerations for UK investors:

Income Tax

• Dividends: Income from dividends is taxed at your income tax rate. However, there's a dividend allowance that can be used to reduce or eliminate this tax.
• Interest: Interest earned on savings accounts and bonds is generally taxable as income.

Capital Gains Tax (CGT)

• This applies when you sell an asset for more than you paid for it.
• There is an annual CGT exemption, but gains above this threshold are taxed at your capital gains tax rate.
• Certain assets, like shares held within an ISA, are exempt from CGT.

Inheritance Tax (IHT)

• If your estate exceeds the inheritance tax threshold, your beneficiaries may have to pay tax on the inherited assets.
• Holding investments within certain tax-efficient wrappers can help mitigate IHT.

Tax-Efficient Investment Wrappers

• Individual Savings Accounts (ISAs): These offer tax-free growth on savings and investments.
• Pension Schemes: Provide tax relief on contributions and tax-free growth.

Other Considerations

• Double Taxation Relief: If you have income or investments overseas, you might be eligible for double taxation relief.
• Tax-Loss Harvesting: Selling loss-making investments can offset capital gains, reducing your tax bill.
• Professional Advice: For complex financial situations, consider consulting a tax advisor.

Important Note: Tax rules can be complex and subject to change. It's essential to stay updated on the latest tax regulations and consider seeking professional advice if needed.

INVESTMENTS 1: The Fundamentals of Investing
INVESTMENTS 2: Types of Investing
INVESTMENTS 3: Planning
INVESTMENTS 4: Research
INVESTMENTS 5: Tools

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