by The Investor
on April 11, 2008
The Dividend Growth Investor blog has an interesting post about long-term dividend investing. His rule of thumb is that a dollar saved in your twenties will provide a dollar a year in your sixties:
I found that the average time it took a $1,000 investment to produce $1,000 in dividend income for a full year was 35 years. In other words if you contributed $1,000 towards your retirement by investing in a broadly diversified stock index fund when you are 23 in 2008, you would expect to achieve $1,000 in dividend income on average by the age of 58.
The chart below shows that the longest period to achieve the desired dividend income was 45 years, for those who started in 1928. The shortest it took to achieve $1,000 in dividend income from a $1,000 investment was only 27 years for those who started in 1941.
On a less positive note, the writer points out that US dividend investors have had to wait longer every year for their dollar return payout, due to decreasing dividend yields.
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by The Investor
on April 11, 2008
This is the last in my series on changes to UK taxation.
Gains on AIM shares now taxed at 18%
This is more a sting in the tail of the changes to the Capital Gains Tax (CGT) regime we looked at earlier in the week than a wholly new rule.
AIM shares are listed on the Alternative Investment Market. Since most AIM shares were classed as business assets, it used to be possible to pay less Capital Gains tax on gains, provided you held the shares for two years to qualify for the 10% business assets tax rate.
Now all Capital Gains (bar the first £1million that qualify under the special Entrepreneur’s Relief scheme) are taxed at a flat 18%, AIM shares no longer have any special CGT advantage over FTSE 100 shares.
Make a £100 gain on any shares outside of your personal CGT allowance , and you’ll pay 18% tax, whatever the shares you sell. Hardly a way of encouraging money to flow to the riskier start-up businesses that tend to predominate on AIM, but then that hasn’t been on the agenda for a few years now.
AIM shares still have an inheritance tax perk
It is still possible to use AIM shares to reduce inheritance tax. But with the inheritance tax threshold having risen to £600,000 for couples, the number of people who will benefit from doing so won’t be great, especially as most UK wealth is tied up in housing; you can hardly live in a portfolio of AIM shares before you pop your clogs.
Everything you could want to know about UK tax (and much, MUCH more) is available on the Government’s official tax pages. Why not instead subscribe to Monevator to keep cutting to the chase?
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by The Investor
on April 10, 2008
This post is one of a series on the changes to the UK personal tax regime introduced in the 2008/09 financial year.
All Capital Gains Tax charged at 18%
We all have a personal allowance, currently £9,600 (and distinct from your personal income tax allowance) before Capital Gains Tax is due. You are also allowed to dispose of personal goods of up to £6,000 every year, and generally your main home is free of Capital Gains tax as well.
After that, you’ll be charged on gains at 18%.
Rarely has a new law seemed so sensible, yet so widely derided by the press and public, as the rushed implementation of this flat Capital Gains Tax (CGT) regime.
The idea of a single, flat rate of CGT has much to commend it. Having a hodge podge of rates for AIM shares, business assets, and investments held for different periods of time was a pain in the posterior neck.
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by The Investor
on April 9, 2008
Just when peer-to-peer bank Zopa was getting interesting again thanks to higher rates, it’s somewhat annoyingly announced plans to limit the kinds of loans you can make with your savings.
The new regime will see one, two and four-year loan terms scrapped, with only 36 or 60 month loans being offered to borrowers. This means you can no longer lock away your money as a lender for just a year or two in the normal market, although the ‘listings’ market, where you deal with individuals, will still offer the old flexibility.
Zopa claims the move will streamline the business for both lenders and borrowers. It believes too many lenders are put off by all the different fiddly options, and argues that the 36 and 60 month terms make for more attractive lending.
I’m uncomfortable however with the idea of locking myself into such a novel business model for three years or more, so I’ll probably not increase my Zopa lending as planned, at least not until these changes are digested by the Zopa community.
The full message from Zopa is as follows:
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