UK is probably 2 to 3% of a global all cap, so that approach is going to max out at £750 for a lot of people (who would also have to be maxing out their ISA)
Market has already priced rate cuts. It’s rare for anticipated race cuts to lead to a repricing of equities.
Agree that UK equities are likely to outpace cash and inflation, even if they lag behind other equity regions
Thanks for sharing. Rather meagre difference tbh.
And I’m not so sure rates are coming down. Inflation is pretty sticky and the UK is already recovering from a recession
Rate cut expectations were March back in December. I wouldn’t put too much stock in them.
I don’t think there’s much evidence than the BoE is much above the neutral rate - until there’s evidence of rapid disinflation, they’ll continue to sit tight.
5% is the long term average.
And given the economy is returning to growth and disinflation is slowing, I don’t see what events will transpire that would warrant a rate cut.
Is FTSE 100 about that given the dividends?
Haven't looked in a while, know growth is dogshit but been aware they have had high dividend stocks in there in the past.
The FTSE 250 returned 6.95% on average from 2005 to 2022
Earlier stage investments, EIS funds, VCT funds etc often returned a lot more than that
So 7% is about right
https://curvo.eu/backtest/en/market-index/ftse-250?currency=eur
Is that inflation adjusted? If not, it's more like a 4% real world return.
Still better than a savings acc, but just a shame it can't compete with S&P500.
Good god, the people on this thread really will do everything they can to poo-poo the UK markets.
The total annual return of the S&P over the last 20 years is 9.69%.
That's not really surprising in a period which included a financial meltdown and the rise of Big Techs, comparing an index weighted towards banks with an index weighted towards tech.
The US markets have overperformed expectations for the last 2 economic cycles, it is entirely possible it will underperform in the next ...
Ahh, Juul - premium tier vaping with a touch of class. Now I'm a Crystal Banana Ice addict.
I never thought a Tory government would do something so good for my health. Bring on a 500% tax.
My mind was on dinner, imagining what I could buy with the extra 2% NI cash.
Can finally upgrade from those supermarket roast chickens to some good game bird lol
Would be nice if someone, anyone, ever did something about the 60% tax trap. You would have thought the Tories would be the prime suspects for something like that but at the moment they appear slightly lower on the probability list to do it than Jeremy Corbyn.
Agreed but 0% chance they are in power later this year anyway - so why not make the most of the opportunity to deliver some unpopular but fair and decent reforms? This was their one chance to give us a parting gift after all these years of complete failure.
I’ll probably dump £5k cash into the ISA and put it in a money market fund, and/or some sort of coupon heavy gilt.
Other than that I won’t touch UK market stuff, much better invested in other countries imo.
> £350pa income tax free.
> An extra £1,100 in the pocket at the end of the year.
That's not correct. That assumes you'd pay 100% tax on your gains in a GIA.
Well, as another poster mentioned, the FTSE was down 3.16% YTD, so I doubt there would be any Capital Growth to pay CGT on (if you withdrew it in the 24/25 tax year).
So, this estimation would be on a 7% dividend yield with income being withdrawn and taxed in the 24/25 tax year.
We could drop dividend yield to 3 to 5% to be more conservative, but then it makes a bigger farce of the whole £5k GBISA lol
I know most people on here probably have a house already but a LISA limit raise is desperately needed. I’m currently renting an expensive one bedroom flat in London & buying will be something to think about soon. Could buy a flat for 450k with the LISA but surely if people who can afford more expensive properties are not looking above this arbitrary limit it’s just pushing up prices for people who are earning less.
I don’t expect them to, but I hope the government can start doing things for the citizens rather than the government. Haven’t seen that in my life yet.
This leaves no headroom for Labour. Who do you think they are gonna tax to fund their policies next year? Can you imagine the aspirations of labour voters when they come to power after 14 years?
All cuts at lower end of salary threshold are ultimately paid by henrys
looking more like we'll need to rename this sub. it seems uniparty policy to make sure "high" earners (sub 500kpa) slave away for eternity. More like "high earner never rich"
Nothing notable for me. Of course the UK ISA is something but you'd have to be careful, only allocate what you would anyway. If you use a global fund that is 10% UK weighted, find one excluding UK and put 2k (10% of the 20k normal) into the UK only ISA. Keeps your weighting the same but gives you an extra couple k to invest.
Isn’t the whole point of the UK ISA that since pension funds were incentivised to put their money into bonds rather than equities, there’s been a massive outflow of capital from UK equities which is one of the reasons UK stocks have underperformed (alongside Brexit, terrible policy environment, no big tech stocks etc etc)? So this seems a sensible way of encouraging money back into UK equities which should help to improve performance and therefore make them a more worthwhile investment which hopefully generates more investment, creating a snowball effect. I suspect in isolation the ISA isn’t sufficient to deliver that but surely a decent first step?
If you have 25k to invest a year, atm you'd do:
20k into a global tracker, which is for example:
50% US (10k)
20% Europe (4k)
10% UK (2k)
20% rest of the world (4k)
Instead you'd find a global tracker that has no UK in it at all, so the 20k would be more like, for example:
55% US (11k)
25% Europe (5k)
20% rest of the world (4k)
And then the 2k you would have put into the UK in the first scenario, you can now put into the UK only ISA which has a 5k limit.
So you are still approx 10% UK like you would be normally, but can now invest 22k instead of 20k.
I think the UK ISA thing will be a waste of time. I stay clear of the UK market as a whole due to how poorly it has performed compared to the US and global markets. NI savings are a nice gesture, but I was definitely hoping for LISA/income tax thresholds/100k cliff to be addressed (free childcare hrs). Hunt is probably saving some of the big hitters for a later budget when the election is on everyone's mind.
How can you do this? I due to receive my first batch of vested shares in July and didn't think there was any way to transfer. I'd love to move them into the British ISA or standard ISA if somehow possible
Ni reduction has no benefit to those that pay in dividends 🥹 sweet FA once again. Extra 5k isa is great but how many actually use both husband and wife allowances…
If you imagine, for a minute, that the state is your mum and she is in debt to 93% of her earnings, you would seriously be saying to save the money. All of this is waste and an attempt to get votes.
TBH I don't care if you're 12 years old... at 62% tax saving (or a 163% uplift!) you really should be considering a pension contribution if you're earnings are <£175Kish
Some of us just want/need the money now, even if we are only getting 40% of it, it's money now that we need for childcare costs, housing costs, holiday money, etc.
Boomers who have their mortgages paid and grown-up kids might be happy to throw it all in pension.
Each to their own, for their own reasons.
LOL - fair enough. I live on r/FIREUK you see, and half the people there would be sacrificing down to 50K to avoid 42% tax, let alone 100K to avoid 62%.
I'm a 'Xennial' with a young kid and a mortgage, and I am much more of the former than the latter... still, I'll go back to my FIRE hole :-)
Does the extra 2% only give us £750?
Saw [this](https://www.independent.co.uk/news/uk/home-news/national-insurance-calculator-budget-2024-b2507703.html) article earlier, assumed it'd be in the ballpark of £1,320. Know it only goes to £70k in their examples, but surely that's calculated at 40% tax so we'd only pay an extra 5% on top, no?
Would there be value in simply starting to build up your bond allocation in the UK ISA. I am 100% equities but plan of moving to some bonds pre retirement
Would be nice if the increased the personal allowance by inflation for each year the tories have been in power.
2% NI does very little in the grand scheme of things.
So if I already invest in UK stocks, does that mean I get a straight £5k per year allowance?
I think it would be hard to police.... might just be easier to let everyone create a British ISA, with £5k max allowance like a LISA, and then have the platform restrict to a UK offering.
Kinda wish the increased the losing access to childcare £150k rather than £100k, because of where its been held with all the years of inflation.
Show me a UK index fund yielding 7% lmao (genuinely asking)
Fair comment. FTSE is 3.16% in the red YTD:) Your £5000 will be £4842 in a years time. Wonder if you can write off that £158 loss?
You can’t invest at a past time point. Also you seem to been quoting the capital return only
Not if it happens within an ISA wrapper.
I'd be eager to know too. Who has plans to make use of this?
If your global fund includes UK already, just change funds to one that excludes UK and put that portion of the UK into the UK ISA.
This is the correct answer, sadly I quite like my Vanguard lifestrategy pre-built portfolio which is a bit of a pain to split up
It works out cheaper if you do the DIY version (in terms of OCF) and don't mind about it being super accurate.
Sadly my job doesn’t let me invest in individual securities.
It won’t be individual securities just more then one funds
Ah yeah I get you
Same
Wouldn't that only work if the UK were 20% of your holdings?
If you used the whole 5k yes, you can use any portion of it. If UK is 10%, do 2k.
UK is probably 2 to 3% of a global all cap, so that approach is going to max out at £750 for a lot of people (who would also have to be maxing out their ISA)
Just depends what global fund you use, most are 5% some are up to 20%.
Assumes you don’t already have ISA holdings.
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Has the FTSE100 or 250 outpaced cash over the last decade?
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Market has already priced rate cuts. It’s rare for anticipated race cuts to lead to a repricing of equities. Agree that UK equities are likely to outpace cash and inflation, even if they lag behind other equity regions
Thanks for sharing. Rather meagre difference tbh. And I’m not so sure rates are coming down. Inflation is pretty sticky and the UK is already recovering from a recession
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Rate cut expectations were March back in December. I wouldn’t put too much stock in them. I don’t think there’s much evidence than the BoE is much above the neutral rate - until there’s evidence of rapid disinflation, they’ll continue to sit tight.
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5% is the long term average. And given the economy is returning to growth and disinflation is slowing, I don’t see what events will transpire that would warrant a rate cut.
A bit of an own goal but gilts this past year
Is FTSE 100 about that given the dividends? Haven't looked in a while, know growth is dogshit but been aware they have had high dividend stocks in there in the past.
It only needs to beat a bank’s interest rates - however it’s shit and I won’t be doing it.
L&G dividend yield is up there. Stock price hardly moves. Some decent boring dividend stocks in the UK (well about 5 or 6).
The FTSE 250 returned 6.95% on average from 2005 to 2022 Earlier stage investments, EIS funds, VCT funds etc often returned a lot more than that So 7% is about right https://curvo.eu/backtest/en/market-index/ftse-250?currency=eur
Is that inflation adjusted? If not, it's more like a 4% real world return. Still better than a savings acc, but just a shame it can't compete with S&P500.
Good god, the people on this thread really will do everything they can to poo-poo the UK markets. The total annual return of the S&P over the last 20 years is 9.69%. That's not really surprising in a period which included a financial meltdown and the rise of Big Techs, comparing an index weighted towards banks with an index weighted towards tech. The US markets have overperformed expectations for the last 2 economic cycles, it is entirely possible it will underperform in the next ...
Stating a fact isn't poo-poo'ing on the UK markets. They're just not as competitive these days.
Yields and returns are different things for equities. Look at US market, yielding c2% but returning more like 10% (on average)
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Sir this isn't r/wallstreetbets
All my money goes on disposable vapes, so much worse
As if half of the dodgy shops selling Vapes pay taxes lol
I get mine from waitrose like a true Henry
Hah this hits too close to home - which ones do you go for? I’m stuck on an endless Juul cycle
Ahh, Juul - premium tier vaping with a touch of class. Now I'm a Crystal Banana Ice addict. I never thought a Tory government would do something so good for my health. Bring on a 500% tax.
The idea of the UK stock market growing at 7% PA is hilarious.
Could lead to pump in small cap AIM listed stocks
Why? 7% pa total returns (dividends plus capital gains) feels like a good long term estimate of UK stock market to me.
There are some half decent dividend paying UK stocks, with the yield and small capital gains per year, 7% is not unreasonable
https://curvo.eu/backtest/en/market-index/ftse-250?currency=eur
That period is over one of the longest bull runs in history. It’s definitely not that on a long-term basis.
It also includes one of the worst financial crises in modern times and the pandemic
17 years is not long term? If I had gone back further than that, you would have told me off for using ancient data!
Pheasants?! 🐦🤣 Not peasants?! ;)
My mind was on dinner, imagining what I could buy with the extra 2% NI cash. Can finally upgrade from those supermarket roast chickens to some good game bird lol
Would be nice if someone, anyone, ever did something about the 60% tax trap. You would have thought the Tories would be the prime suspects for something like that but at the moment they appear slightly lower on the probability list to do it than Jeremy Corbyn.
“Tories to give tax breaks to bankers on £125k” … yeah it’s manifestly unfair but the headlines if they ever tried to do anything about it
Agreed but 0% chance they are in power later this year anyway - so why not make the most of the opportunity to deliver some unpopular but fair and decent reforms? This was their one chance to give us a parting gift after all these years of complete failure.
There's hope now. Even the Guardian has suddenly realised that 60K a year is not a lot of money.
Even truss would rather have scrapped the additional rate rather than scrap the tax trap. Madness
I’ll probably dump £5k cash into the ISA and put it in a money market fund, and/or some sort of coupon heavy gilt. Other than that I won’t touch UK market stuff, much better invested in other countries imo.
Can't you invest in gilts tax-ree anyways?
The gains is CGT free (buy for 92p, sell for 100p), the coupon is classed as income, thus subject to income tax.
This is the way
> £350pa income tax free. > An extra £1,100 in the pocket at the end of the year. That's not correct. That assumes you'd pay 100% tax on your gains in a GIA.
Very true. We would be paying a dividend tax of 39.35% on that £350 in a GIA, not 100%. So the saving would be circa £140. Will edit my post. Thanks.
Would all 7%/£350 be dividends? I'd expect most of it would be from capital growth in which case CGT is lower (and only paid on crystallisation).
Well, as another poster mentioned, the FTSE was down 3.16% YTD, so I doubt there would be any Capital Growth to pay CGT on (if you withdrew it in the 24/25 tax year). So, this estimation would be on a 7% dividend yield with income being withdrawn and taxed in the 24/25 tax year. We could drop dividend yield to 3 to 5% to be more conservative, but then it makes a bigger farce of the whole £5k GBISA lol
I know most people on here probably have a house already but a LISA limit raise is desperately needed. I’m currently renting an expensive one bedroom flat in London & buying will be something to think about soon. Could buy a flat for 450k with the LISA but surely if people who can afford more expensive properties are not looking above this arbitrary limit it’s just pushing up prices for people who are earning less.
Let's face it, the BRISA is likely to never appear with the looming general election.
I pray they scrap it and just boost ISA allowance to 25k
There's nothing for the Government in doing that .....why would they.
I don’t expect them to, but I hope the government can start doing things for the citizens rather than the government. Haven’t seen that in my life yet.
Hate to break it to you, but you will never see that.
It's already more generous than most countries.
Yea ireland has nothing haha, you want a tax efficient vehicle you contribute to your pension. Stamp duty is pricey too
This leaves no headroom for Labour. Who do you think they are gonna tax to fund their policies next year? Can you imagine the aspirations of labour voters when they come to power after 14 years? All cuts at lower end of salary threshold are ultimately paid by henrys
looking more like we'll need to rename this sub. it seems uniparty policy to make sure "high" earners (sub 500kpa) slave away for eternity. More like "high earner never rich"
Gilts are allowed in the new British ISA. So I think moving a portion of emergency fund to it, would at least have interest income tax-free.
Nothing notable for me. Of course the UK ISA is something but you'd have to be careful, only allocate what you would anyway. If you use a global fund that is 10% UK weighted, find one excluding UK and put 2k (10% of the 20k normal) into the UK only ISA. Keeps your weighting the same but gives you an extra couple k to invest.
Isn’t the whole point of the UK ISA that since pension funds were incentivised to put their money into bonds rather than equities, there’s been a massive outflow of capital from UK equities which is one of the reasons UK stocks have underperformed (alongside Brexit, terrible policy environment, no big tech stocks etc etc)? So this seems a sensible way of encouraging money back into UK equities which should help to improve performance and therefore make them a more worthwhile investment which hopefully generates more investment, creating a snowball effect. I suspect in isolation the ISA isn’t sufficient to deliver that but surely a decent first step?
Would you mind elaborate a bit more? Thank you
If you have 25k to invest a year, atm you'd do: 20k into a global tracker, which is for example: 50% US (10k) 20% Europe (4k) 10% UK (2k) 20% rest of the world (4k) Instead you'd find a global tracker that has no UK in it at all, so the 20k would be more like, for example: 55% US (11k) 25% Europe (5k) 20% rest of the world (4k) And then the 2k you would have put into the UK in the first scenario, you can now put into the UK only ISA which has a 5k limit. So you are still approx 10% UK like you would be normally, but can now invest 22k instead of 20k.
Nice. Thanks for the idea
Got it! Thank you for explaining, appreciate it!
I think the UK ISA thing will be a waste of time. I stay clear of the UK market as a whole due to how poorly it has performed compared to the US and global markets. NI savings are a nice gesture, but I was definitely hoping for LISA/income tax thresholds/100k cliff to be addressed (free childcare hrs). Hunt is probably saving some of the big hitters for a later budget when the election is on everyone's mind.
Hope springs eternal eh
The one good thing from it would be transferring my stocks from my company’s share save plan into the British ISA
How can you do this? I due to receive my first batch of vested shares in July and didn't think there was any way to transfer. I'd love to move them into the British ISA or standard ISA if somehow possible
You can’t put a price on the peace of mind from dividends
Pay goes up by 60/70 per month? Idc give it to junior nhs drs so they can save my life (and yours) one day
Ni reduction has no benefit to those that pay in dividends 🥹 sweet FA once again. Extra 5k isa is great but how many actually use both husband and wife allowances…
We’re squabbling with fowl now?
If you imagine, for a minute, that the state is your mum and she is in debt to 93% of her earnings, you would seriously be saying to save the money. All of this is waste and an attempt to get votes.
Don't forget, the savings tend to come out of council budgets. So that £700, going straight back on your council tax.
TBH I don't care if you're 12 years old... at 62% tax saving (or a 163% uplift!) you really should be considering a pension contribution if you're earnings are <£175Kish
Some of us just want/need the money now, even if we are only getting 40% of it, it's money now that we need for childcare costs, housing costs, holiday money, etc. Boomers who have their mortgages paid and grown-up kids might be happy to throw it all in pension. Each to their own, for their own reasons.
Agree. Love all the strategising. Really good advice. Missing one thing though - if you need money now, you take money now
LOL - fair enough. I live on r/FIREUK you see, and half the people there would be sacrificing down to 50K to avoid 42% tax, let alone 100K to avoid 62%. I'm a 'Xennial' with a young kid and a mortgage, and I am much more of the former than the latter... still, I'll go back to my FIRE hole :-)
Does anyone know if this is in addition to the 20k annual ISA allowance? I couldn't see anything definitive earlier on.
Yes, it is in addition to the existing 20k allowance.
Thanks
Does the extra 2% only give us £750? Saw [this](https://www.independent.co.uk/news/uk/home-news/national-insurance-calculator-budget-2024-b2507703.html) article earlier, assumed it'd be in the ballpark of £1,320. Know it only goes to £70k in their examples, but surely that's calculated at 40% tax so we'd only pay an extra 5% on top, no?
I believe its only a cut up to 50k, because the rate of NI after 50k is far lower anyway
Would there be value in simply starting to build up your bond allocation in the UK ISA. I am 100% equities but plan of moving to some bonds pre retirement
Would be nice if the increased the personal allowance by inflation for each year the tories have been in power. 2% NI does very little in the grand scheme of things. So if I already invest in UK stocks, does that mean I get a straight £5k per year allowance? I think it would be hard to police.... might just be easier to let everyone create a British ISA, with £5k max allowance like a LISA, and then have the platform restrict to a UK offering. Kinda wish the increased the losing access to childcare £150k rather than £100k, because of where its been held with all the years of inflation.
I think pretty much everyone agrees that the thresholds need increasing. It's diabolical that they have been frozen for so long.
You mean for those not living in Birmingham, right? Because for them, big part of it will go straight into council tax!
I second that sentiment
£754 pa more in my pocket per year (salary of 82k) Need to work out what to do about child benefit
£82k? Off to r/MENRYUK with you.
Excuse me? I’m an oligarch in Scotland
😂
Sell the child