In recent years, the dividend allowance has been reduced significantly, drawing more people into the tax net. With only £500 in allowance, investors need to be mindful of their exposure to dividend taxes.
Here at Max Pro we are keen to help you legitimately reduce your tax burden. He are some top tips on how to avoid dividend tax…..
ISAs: Dividends received from investments held within Stocks and Shares ISAs are free from income tax.
Pensions: Investments held in pensions, including self-invested pension plans (SIPPs), can accumulate dividends without being subject to tax.
Use your dividend allowance: Make the most of your £500 dividend allowance each year by investing in UK tracker funds or other dividend-paying investments.
Buddy up: Transfer investments between spouses or civil partners to reduce tax liabilities and take advantage of lower tax bands.
Venture capital trusts (VCTs): Investing in VCTs at issue can provide tax-free dividends, although they come with high risk and limited liquidity.
Avoid accumulation units: Be aware that accumulation units reinvest dividends without paying them out but are still taxable.
Mixed asset funds: Mixed-asset or multi-asset funds may receive both dividends and interest, so be mindful of the impact on your tax liability.
Cut dividend payers: Consider reducing exposure to dividend payers in favour of growth funds and stocks, although this could lead to capital gains tax liabilities.
We must stress that investors should weigh these options carefully, ensuring they balance their investment strategy with tax considerations. Always consult your registered financial advisor and Contact Us for great tax advice.
Remember that cutting dividend payers may result in an unbalanced portfolio, so it’s essential to maintain a well-diversified portfolio while minimising tax exposure.