Hi, I just started investing around a couple of months ago through Degiro in two distributing ETFs each tracking the MSCI World index and the MSCI Emerging Markets index, from Degiro's commission-free list. My investing strategy is to keep investing every month for at least 20 years to facilitate my retirement.
I discovered the concept of Stocks and Shares ISAs like Vanguard's and I was wondering if it would be worth switching to something tax-free like that? Would it make a big difference in the long term all fees considered? Thanks.
es always make the most of your tax breaks. Use your ISA allowance first then pay into a regular account after. Remember the investments in your ISA will always be totally tax free. Outside an ISA, you may have to pay tax further down the line if you build up a decent amount of savings.
However if you’re specifically saving towards retirement then why not pay into a pension? Many providers offer SIPPs which tend to have the same wide investment choice as S&S ISAs. Most importantly, pension contributions up to your annual allowance (equal to your annual income, usually up to a maximum of £40k) are topped up by the government by 20% for basic rate taxpayers, 40% for higher rate and 45% for additional rate. So if you’re saving for retirement and you won’t need to touch the money before age 55, then strongly consider opening a SIPP or paying more into your workplace pension.
I would love to see an appropriate answer to this question as I've been wondering the same thing. Describe pros and cons as well, please. Thanks.
Thank you for the bump man. I've tried looking this up online but I can't find any proper answers :/
In the UK you have a tax free allowance of £2000 of dividends a year and £12,000 of capital gains per year. So until your investment portfolio grows to a certain size, there is no tax difference between an ISA and a non-ISA account.
You will likely run out of the dividend allowance first. Assuming a dividend yield of 2.5%, a portfolio worth £80k would generate £2000 of taxable dividends and hence as it grows to more than £80k you start paying some tax.
An ISA is basically unlimited tax free dividends and capital gains, but you can only put £20k in per year.
So in the short term it doesn't matter what type of account you use tax-wise. Since there are free non-ISA accounts (DeGiro, Freetrade) these will be the absolute lowest cost options to start.
In the long term, the tax savings from an ISA will be greater than the account fees (at least for something low cost like Vanguard) so you want all your money in there eventually.
The middle part, i.e. when to move money from your non-ISA account into an ISA, is really a function of how much money you are saving. If you are saving £15k a year, there will only be £5k left to drip feed your non-ISA savings into the ISA, but they might be growing faster than that if you wait until you have £80k there. If you are saving a smaller amount, say £6k a year, then I would amass £80k in Freetrade & DeGiro, then start saving into an ISA and also moving the non-ISA funds into the ISA with the rest of your allowance.
In this case, what would be a very fee-efficient investing? Start off with DeGiro as I'd most likely save £6-7k a year. I've seen a lot of people here to use IB after they build up a £10K portfolio due to having 30% of securities lend out with the basic account. So, I was thinking of doing the following: sticking to DeGiro until 20K euros (as after that your money is not protected in case sth happens); transfering to IB until £80K and moving into ISAs when you hit that tax bracket after £80K. I'm just trying to avoid fees as much as I can, though they are everywhere...
Edit: DeGiro Dutch Investor Protecting Scheme.
IB are fairly expensive due to the $10 per month minimum on commissions. Freetrade has no fees and is covered by FSCS up to £85k. They don't have as many ETFs available as DeGiro but they do have Vanguard FTSE All World.
Aside from that, Vanguard, iWeb, and AJ Bell are cheap options when going from 20k - 80k
The commissions on Vanguard are a few basis points. The tax you'll pay on gains and dividends is between 20%-45% depending on your slab.
Max your ISAs ahead of non-ISA contributions (unless you want to focus more on pensions, like someone on this thread mentioned).
In any case, follow the flowchart on the sidebar.
Great advice on this post , i use degiro. Personally use isa and personal pensions for more conservative index’s or etfs and degiro for investments or swing/day trading.
212 offer an ISA platform with no commissions or fees. Not sure why you would use Degiro over that...
