Those who tell me this say they are invested in share portfolios and claim they don’t pay tax. I am aware that the amount invested determines the tax liable, but I would like clarification on whether people who have given their finances to investment managers to handle are better off.There are a few reasons that having all your pension money in cash with the bank is not ideal:
. Investments in the stock market beat cash over time. For example, over the past 10 years, the average return from a balanced fund was 11% a year. After taking inflation into account, this means the investment delivered 5.6% above inflation. . Dividends that you earn from investments in shares are paid to you after tax. That means the company that issues the dividends pays the tax , so it does not affect your tax rate and it does not increase the amount of tax you pay. This is possibly what your friends are doing if they say they are not paying tax.
It depends on your tax rate, but it can be more tax efficient to earn an income from dividends and capital gains . The downside of an investment in shares is that the stock market does not give a predictable return.
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