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Investing advice going forward


sam1994

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sam1994

I am wondering if anyone has some advice about investing going forward.

Over the past few years I've been investing in my SIPP and ISA each year, which has let me put away £60k a year. But now I think the SIPP has enough money in it for my age and I'm sure I'll get fucked by the lifetime allowance or some other pension rule changes they'll make in the future to try and keep the house of cards from falling down. 

I'm planning to leave the UK in a few years

Current holdings:

LISA - ~£25k (£20k iShares Core MSCI World ETF USD Acc GBP; £5k FTSE 100 ETF). Can only buy ETFs as holding other funds or shares is very costly. My concern about the LISA is that I can't pull it unless I buy a new build or am 60. This means if I move to another country I will get potentially fucked because there is no dual tax agreement for ISAs as there's no tax in the UK on them, so this is fair game. I'm hoping that the 25% top up by UK gov mitigates this; or the government and banks realise LISAs aren't that popular and let people convert them in to a normal ISA.

Bitcoin - ~1.05 BTC - £38k. No plans to buy or sell -- just watching this play out and using it as a hedge against fiat.

ISA - £~111k (£75k Vanguard LS100 Equity A Acc; £35k Vanguard FTSE Glb All Cap Idx Acc). I started investing in the Global All Cap fund now as I found that the LifeStrategy 100 fund was too weighted towards the UK. 

SIPP - £~252k (£162k Vanguard LS100 Equity A Acc; £89kVanguard FTSE Glb All Cap Idx Acc)

Metal - 5x 1oz gold Britannia. I was planning to add 5 coins a year since 2019, but have kept waiting for gold to go down. Maybe I should stop waiting and load up? I was looking at silver some time ago, but it's no longer VAT free and the overhead seems high. What does seem appealing is that the silver:gold ratio still seems very high. 

Hopefully I am in a good position. 

I will put another £20k in to the ISA on 6th April. But I'm concerned about too much cash sitting in the bank and inflation. I suppose that I should be following the advice in the Credit Deflation thread, but I have no edge, so I have been trying to play it safe by buying broad, global funds which just track the market. 

Now I have £40k a year that I used to be able to get rid of, but can't trivially. 

Should I open a general trading account with a broker? My understanding is that this isn't ideal for me, but I'm unsure of how taxation works. If I buy an accumulation fund and don't withdraw any profits and keep my holding, do I avoid any taxes until I start selling? Am I better off with dividend or accumulation funds here? I can understand how dividend funds could be easier for paying taxes, but accumulation funds seem complex in terms of working out what should be paid as CGT and what should be paid as a dividend tax. 

I am also wary of opening the trading account because I am primarily paying myself from Ltd Co via dividends. If the trading account has a lot of money in it, I think this could put me on the higher dividend tax rate, which means drawing money from the company in the future comes with a much higher price. 

@Frank Hovis would probably now suggest VCTs, but it looks like the days for that might be gone. The funds seem more limited now and the ones that do exist seem to have very high fees. 

I've also read that you can invest via your Ltd Company, or even start a new company and loan money from your trading company to your investment company to avoid being classified as a Closed Investment Company and paying higher taxes, but this seems like it could be problematic, and still limits how much money I can draw out. I am already doing what I can to invest back in business -- buying as much stock as I can physically store to mitigate chip shortages and hedge against inflation. 

I don't know about buying UK property. I considered it, particularly as a way to dispose of the LISA tax liability if I move abroad, but things seem overpriced significantly. I should get an EU passport in several months, which means that I can move abroad without having to meet a golden visa requirement which limits where I can go and what/where I can buy. But I am not there yet. Also what concerns me is that if I bought a place in the UK, and money permitted, I wouldn't necessarily want to sell it when I move abroad because that way I always have a base if I need to return to the UK. However, with four million people in Ukraine displaced and counting, I can see legislation impacting empty houses or penalising those with property anywhere else worldwide (some kind of 2nd home tax). 

Cheers

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Déjà vu. We only had one of these a few days ago.

Not sure why you would want to follow a thread of a conflicted and contradictory bunch.

Seems to me you're coming at this from the wrong end. My advice would be seek out a professional(s) a get some proper advice given the complexities, tax situations and potential foreign scenrios etc etc.

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AlfredTheLittle

Why not just enjoy your money? I assume you're reasonably young.

If you have plenty of money, maybe gamble with some high risk investments within the ISA, it would be great to build up a big tax free ISA fund, but on the other hand if you're going to live abroad you'll probably be taxed on the ISA anyway by the country you end up living in.

Accumulation units are taxed the same way as income ones - the income is allocated to you and taxed each year even if you don't receive it. If the fund doesn't report income to HMRC, then you're not taxed on it each year but when you sell any gains are taxed as income rather than capital gain.

You can invest using your company, and the company won't pay tax on dividends it receives. However, the tax drawbacks are that your company will lose classification as a trading company, so you won't get entrepreneurs relief (BADR) if you sell or close down, and when the company sells its investments you're double taxed on the gains - first the company pays corporation tax, then you pay tax on dividends from the company. 

Women? Some good cause that you're interested in? Another business? There's more to life than saving and minimising tax, if you've got a good income and enough saved, then start spending.

 

 

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sam1994
1 hour ago, A_P said:

Déjà vu. We only had one of these a few days ago.

Not sure why you would want to follow a thread of a conflicted and contradictory bunch.

Seems to me you're coming at this from the wrong end. My advice would be seek out a professional(s) a get some proper advice given the complexities, tax situations and potential foreign scenrios etc etc.

Thanks for your advice on AJ Bell charging a fortune for non ETFs.

Don’t IFAs usually charge a percentage? 

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sam1994
1 hour ago, AlfredTheLittle said:

If you have plenty of money, maybe gamble with some high risk investments within the ISA, it would be great to build up a big tax free ISA fund, but on the other hand if you're going to live abroad you'll probably be taxed on the ISA anyway by the country you end up living in.

 

Hoping to liquidate after I get citizenship or determined to be tax resident. If the market seems uncertain I would sell before this.

1 hour ago, AlfredTheLittle said:

Accumulation units are taxed the same way as income ones - the income is allocated to you and taxed each year even if you don't receive it. If the fund doesn't report income to HMRC, then you're not taxed on it each year but when you sell any gains are taxed as income rather than capital gain.

If the fund doesn’t report income - I assume you mean funds domiciles in Ireland etc, is it legal not to declare? And I could sell off within CGT limits or bands  to avoid higher rates?

That’s why I’m confused about my Bitcoin holding. I assume I only need to make declarations when /if I sell. I’ve read from @spunkothat Coinbase are now reporting to HMRC and it looks like there’s policy coming soon.

1 hour ago, AlfredTheLittle said:

invest using your company, and the company won't pay tax on dividends it receives. However, the tax drawbacks are that your company will lose classification as a trading company, so you won't get entrepreneurs relief (BADR) if you sell or close down, and when the company sells its investments you're double taxed on the gains - first the company pays corporation tax, then you pay tax on dividends from the company. 

I’m worried about the company being attractive to patent lawsuit in the future from a troll which is why I want to keep funds low and unattractive 

1 hour ago, AlfredTheLittle said:

Women? Some good cause that you're interested in? Another business? There's more to life than saving and minimising tax, if you've got a good income and enough saved, then start spending.

 

I am. And I got spending creep during lockdown. Women.. that’s another one for Stealth unless I want to go the way of Sgt Heartmen.

Thanks for the advice 

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48 minutes ago, sam1994 said:

Thanks for your advice on AJ Bell charging a fortune for non ETFs.

Don’t IFAs usually charge a percentage? 

I'm not saying specifically go to an IFA. You may have bigger fish to fry with another country, crypto and whatever else is on the horizon.

Whether that is just a one off or continual wealth management will depend on your long term asperations ultimately and where you're thinking of going. Some external expert help might give you some pointers with your raised concerns.

Additionally enlisting outside help so you can focus on the stuff you are good at or enjoy is sometimes better in the long run at the cost of a slightly bigger number.

Just a consideration given you're mostly going to get the same view here with DIY. Which is mostly fine if you're keeping under thresholds and keeping things simple.

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sam1994
32 minutes ago, A_P said:

Just a consideration given you're mostly going to get the same view here with DIY. Which is mostly fine if you're keeping under thresholds and keeping things simple.

That's a fair point.

I read UK personal finance advice blogs where they suggested buying individual ETFs instead of a Vanguard fund because there is a small saving, and then rebalancing. But this sounds like ballache to save maybe 0.5-.01% in management fees yearly. 

35 minutes ago, A_P said:

Whether that is just a one off or continual wealth management will depend on your long term asperations ultimately and where you're thinking of going.

I want to keep working, but want to be able to work on my time and passion. I can currently do this, but tech moves fast and I don't believe my niche is sustainable. Big firms are vertically and horizontally integrating everywhere. What I also don't want to regret, is making  my money at too young an age, vs someone with a steady income who can be paid through a crisis and buy things on the cheap..

My goal is to preserve wealth -- and I think everyone wants that.. (hardly unique), so that if I do want to go on a spending spree later, I can. But I am also trying to position myself so I am not reliant on what I suspect will be non existent state pension systems, and I think private pensions will get raided too. 

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6 hours ago, sam1994 said:

That's a fair point.

I read UK personal finance advice blogs where they suggested buying individual ETFs instead of a Vanguard fund because there is a small saving, and then rebalancing. But this sounds like ballache to save maybe 0.5-.01% in management fees yearly.

Totally agree. It becomes counter-productive. Fine if one enjoys it, however, ultimately, a S & P500, global tracker or single fund like you say are good enough. There really is no secret manual or cheat codes required if one wishes to take the steady path to financial freedom. Think what one could do with all that extra time.

6 hours ago, sam1994 said:

I want to keep working, but want to be able to work on my time and passion. I can currently do this, but tech moves fast and I don't believe my niche is sustainable. Big firms are vertically and horizontally integrating everywhere. What I also don't want to regret, is making  my money at too young an age, vs someone with a steady income who can be paid through a crisis and buy things on the cheap..

My goal is to preserve wealth -- and I think everyone wants that.. (hardly unique), so that if I do want to go on a spending spree later, I can. But I am also trying to position myself so I am not reliant on what I suspect will be non existent state pension systems, and I think private pensions will get raided too. 

Why would you regret making money too young? It is a fantastic springboard. You owe the world nothing. Are you not sufficiently black pilled after the last few years? :D Perhaps consider options on how to be in a position where you're not worrying about state pension or even access to your own pension that you may or may not ever see for whatever reasons. Do you think [insert posh female name] is worrying about keeping under their annual tax allowance, bursting the pension limits or the state pension O.o?

Aim not to have the Timmy mentality. I see a slippery slope of ending up on a basement board where you spend most of your adult/best earning years worrying about protecting your money rather than making things work for you, and well, enjoying it all.

Edited by A_P
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Frank Hovis
2 hours ago, A_P said:

Totally agree. It becomes counter-productive. Fine if one enjoys it, however, ultimately, a S & P500, global tracker or single fund like you say are good enough. There really is no secret manual or cheat codes required if one wishes to take the steady path to financial freedom. Think what one could do with all that extra time.

 

Yep. I've other investments but shifted my main portfolio into trackers on big companies in developed economies and left it.

I shifted it to Vanguard which has low fees for funds and also low fees for the wrapper; there is a cap of fees, on both ISA and SIPP combined, equating to holdings of about £375k IIRC so everything above that is free.

If you have a decent amount that saves thousands in fees annually over most other providers which becomes an additional return.

And we know how those small percentages compound over the years.

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Hardhat

You don't have to buy a new build with the LISA. There's just a cap on property value.

Edit: Also unless you're living rent free already somehow, you might as well work out what you're paying for rent per annum, times it by the years on a mortgage and buy a property that costs around that much. The LISA cap is 450k. You have to live somewhere.

Edited by Hardhat
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sam1994
3 hours ago, A_P said:

Why would you regret making money too young? It is a fantastic springboard. You owe the world nothing. Are you not sufficiently black pilled after the last few years?

My only concern is that by the time I want to use it or enjoy it, it will be eroded away.

1 hour ago, Frank Hovis said:

If you have a decent amount that saves thousands in fees annually over most other providers which becomes an additional return.

I’m using ii currently. They are charging £20 a month combined for SIPP and ISA. So that’s a fixed fee of £240 a year which seems reasonable. Obviously the Vanguard holdings have their fund management fees but I believe that’s the same on Vanguard too.

48 minutes ago, Hardhat said:

You don't have to buy a new build with the LISA

I didn’t know that. I probably confused that requirement with Help to Buy. 

Cheers

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4 hours ago, sam1994 said:

My only concern is that by the time I want to use it or enjoy it, it will be eroded away.

Then I think the answer is to fill the garage up with silver, spam and baked beans 😂

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belfastchild
Just now, Shamone said:

It seems like more money, more stress. 

Id quite enjoy a million quids worth of stress.
Id probably spend a chunk of it on stress relief.

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Shamone

In my humble opinion and albeit limited experience, it does seem that money can bring stress. I don’t earn a lot but if I died tomorrow my wife would only ever have to work part time or less and that is gold to me. 

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Bobthebuilder

Save a bit, invest a bit and spend a bit.

Life passes so fast, I am in my 50s now, it only seems like yesterday that I was leaping around to Nirvana.

About ten years ago I was making some really good money, went through a faze where I bought every electric guitar I had always wanted as a teen. Good ones, vintage, custom shop built, rare, etc.

They have been by far the best money investment I have made, but that's not the point. I have really enjoyed playing them, they are a thing of beauty, they might not pay you a dividend, but they pay you back in so many other ways.

My wife knows which ones to sell last.

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2 hours ago, Shamone said:

It seems like more money, more stress. 

Only if you allow it. Use it like one would a dangerous tool and then no stress required. Problem is very few ever rewire their brains from children and having pocket money, let alone when the numbers start getting big.

If we have sustained 10% inflation people will start having a proper meltdowns as they won't be able to adjust.

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SpectrumFX

You've got the most important thing sorted, which is having the ability to make good money in the first place.

Investing is all well and good, but if you've already got money left over after hitting the ISA contribution limit each year, then I'd recommend focusing some of the rest on life experiences. Go to nice places (Dubrovnik is lovely), and see a bit of the world. If you can take a break from work without fucking up your career then long breaks from work to pursue other interests can be very nice. My mate went and lived in Spain for a couple of years to learn spanish.

 

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AlfredTheLittle
On 01/04/2022 at 22:53, sam1994 said:

Hoping to liquidate after I get citizenship or determined to be tax resident. If the market seems uncertain I would sell before this.

If the fund doesn’t report income - I assume you mean funds domiciles in Ireland etc, is it legal not to declare? And I could sell off within CGT limits or bands  to avoid higher rates?

That’s why I’m confused about my Bitcoin holding. I assume I only need to make declarations when /if I sell. I’ve read from @spunkothat Coinbase are now reporting to HMRC and it looks like there’s policy coming soon.

I’m worried about the company being attractive to patent lawsuit in the future from a troll which is why I want to keep funds low and unattractive 

I am. And I got spending creep during lockdown. Women.. that’s another one for Stealth unless I want to go the way of Sgt Heartmen.

Thanks for the advice 

I'm no expert but basically there used to be a tax dodge where people would invest in funds which didn't pay out income, so the value of the funds went up by the amount of income the fund received and held, and you could then sell it at a gain and pay capital gains tax instead of income tax.

Now offshore fund gains are taxed as income instead of capital gains, unless they specifically allocate all the income they make to investors so that they can be taxed on the income made each year. If you want to google it you need to look up 'reporting and non reporting funds'

 

 

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JoeDavola
On 02/04/2022 at 17:56, Bobthebuilder said:

About ten years ago I was making some really good money, went through a faze where I bought every electric guitar I had always wanted as a teen. Good ones, vintage, custom shop built, rare, etc.

They have been by far the best money investment I have made, but that's not the point. I have really enjoyed playing them, they are a thing of beauty, they might not pay you a dividend, but they pay you back in so many other ways.

My wife knows which ones to sell last.

Yep I bought all the guitars I ever wanted in my 20's/early 30's.

I made the mistake of selling some which I now regret as they've gone way up in price in most cases.

But like you say they give me joy, are a marvellous inflation hedge, and it's another thing that I know I'll never need to spend any real money on again cause I've got everything I want.

Edited by JoeDavola
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Bobthebuilder
3 minutes ago, JoeDavola said:

Yep I bought all the guitars I ever wanted in my 20's/early 30's.

I made the mistake of selling some which I now regret as they've gone way up in price in most cases.

But like you say they give me joy, are a marvellous inflation hedge, and it's another thing that I know I'll never need to spend any real money on again cause I've got everything I want.

I have one that just might have been played on a few Undertones songs...........

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JoeDavola

If I was as rich and young as you @sam1994 I'd not buy a place in the UK, I'd be renting my way around the world (provided you can run your business remotely or at least part time remotely).

Despite your youth and incredible wealth your post reads slightly anxious, please remember to enjoy yourself too!

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sam1994

I've always been a worrier. I used to worry about being late for school or where to go in school if it was raining.. Looking back at it, completely stupid.. 

I don't have a guarantee that I can keep making money in the same way but think I'm good for 4-5 years. I want to move more to SaaS and out of shipping physical goods completely, but it's not easy. This would give me more freedom, particularly abroad. 

On 03/04/2022 at 19:48, AlfredTheLittle said:

Now offshore fund gains are taxed as income instead of capital gains, unless they specifically allocate all the income they make to investors so that they can be taxed on the income made each year. If you want to google it you need to look up 'reporting and non reporting funds'

This is useful to know. Cheers. 

8 hours ago, JoeDavola said:

Despite your youth and incredible wealth your post reads slightly anxious, please remember to enjoy yourself too!

You're not wrong Joe. Before Covid, I'd try and enjoy 3-4 holidays around the world a year. But outside of that, my life is pretty routine. Wake up, work, couple of pints, a ready-meal / takeaway, late night TV and bed. 

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