From switching current accounts to seeking out dividend-paying funds, Moneywise rounds up 50 top tips to boost your income by making your savings work harder for you.
Here are seven ways to boost your savings through investment charges and tax breaks for sophisticated investors. See the our guide 50 ways to boost your savings income for the rest.
30. Choose the right platform for your Isa
An online Isa that lets you invest across a range of funds makes it easy to manage your portfolio. However, platforms have different charging structures, so don’t pay more than you need – it will only eat into your returns. Some charge a fixed percentage of your portfolio, others a flat fee. Flat fees can be expensive for smaller investors, but will make more sense for those investing larger sums. Find out how much you’ll have to pay for trading funds and shares too. What is good value for one investor may not be for another.
31. Be aware of fund management fees
Fund managers charge a fee to manage your money – but higher fees don’t necessarily mean better performance. To compare the costs, you should look for a fund’s ongoing charge figure or OCF. All bar one of the Moneywise First 50 funds have an OCF which is below 1% before performance fees (the one exception is a property fund).
32. What is the impact of fund charges over time?
Take an investment of £10,000 over 20 years, which achieves returns of 6% a year before charges are applied. A lower charge makes a big difference, as seen by these final values:
33. Watch out for Sipp charges too
If you are saving for a retirement in a Sipp (self-invested personal pension), in addition to platform and transaction charges, you’ll also need to take heed of drawdown and withdrawal charges, as well as exit fees if you switch to a different provider.
34. Look into venture capital trusts (VCTs)
VCTs are funds that invest in startup companies in need of finance. Because the government wants these businesses to develop and thrive, it offers generous tax breaks to encourage investors. Hold a newly issued VCT for five years and you will get 30% income tax relief on investments up to £200,000 a year. You’ll also pay no capital gains tax, irrespective of how long you hold it.
35 Consider the enterprise investment scheme (EIS)
The EIS is a government scheme that enables you to buy shares in small or start-up firms and, like VCTs, offers generous tax breaks. You can invest up to £1 million in a year and get 30% income tax relief and pay no capital gains tax, but only if you hold it for at least three years.
36 Invest with care
Isas and pensions are no-brainers as far as tax planning is concerned, but the nature of the small and start-up VCT and EIS companies means they are very high risk and therefore only suited to wealthy investors who can afford sizeable losses.
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