Investments And Tax

Your tax position

Investments and tax The return you get can be income, capital growth or a combination of both. What's important to you is the after tax return that you'll get. The return from some investments is tax-free, but with most the income is subject to income tax and the capital gains are subject to capital gains tax. Whether tax is in fact payable will depend on whether you've used your available allowances and other deductions. So your personal tax position will often make one type of investment more suitable for you than another.

WARNING Advertisements for offshore investments seem very enticing with talk of 'income paid gross' and 'tax-free'. But watch out - often it's only the very tiny print which reveals that only non-residents can get these returns and that UK residents will have to pay tax.

You and tax Everyone, including children, can receive a certain amount of income - whether from earnings or investments or both before they have to pay any income tax. At the minimum, you'll get the single person's allowance. You'll have a higher allowance if you're a married man, you're 65 or over during the tax year (and have an income below a certain level), or you qualify for one of various other income tax allowances. You can also make various other deductions - called outgoings - from your income before tax becomes payable. Once you've used up your outgoings and allowances, tax is charged at the basic rate, and at a higher rate on any income above a given amount.

You have a tax-free allowance before any tax is due on capital gains. When the allowance is used up, you pay capital gains tax at the same rate as the basic rate of income tax. But if your taxable income plus your taxable gains takes you over a given threshold, tax on part of your gains will be charged at a rate equal to the higher rate of income tax.

For more information about Investments And Risks

Investments And Risks

It's impossible to know in advance which are going to be the worst risks to take you can't predict with any accuracy a major stock market crash, a period of runaway inflation, or a nosedive in interest rates, though you can be fairly sure they'll all come to pass if you invest for long enough. The best strategy is to choose a mix of investments with different balances of risk and return to form an investment portfolio which overall reflects the amount of risk you feel comfortable with.

TIP - Never put all your financial eggs in one basket. Spread your savings across a mix of investments.Investments And Risks

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