Dividend stocks appeal to older investors

[stacker512]

But I suspect an incoming Labour government may take much more of it in tax and make one reconsider how sensible it is to pay too much attention to dividends.

Even in an ISA?

[scrumpyjack]

But I suspect an incoming Labour government may take much more of it in tax and make one reconsider how sensible it is to pay too much attention to dividends.

Even in an ISA?

Depends whether they leave ISAs as they are?

[Charlottesquare]

Unfortunately not.

Do you actually know this or are you simply quoting from the HMRC manuals?

Dod

https://www.taxinsider.co.uk/how-to-mak ... 9%3B%20and

https://www.legislation.gov.uk/ukpga/1984/51/contents

Whilst I have not spotted a definition of "income" within the legislation I struggle to view chargeable gains as income, especially given the distinct rates of tax applied for chargeable gains as opposed to income tax rates generally applied to income. To me it looks a hard argument to make that whilst HMG created a distinct tax regime for capital gains, which was taken advantage of by seller when disposing of the asset, that the seller then argues for IHT purposes these gains are somehow "income"

Longmores, solicitors, make this comment

"Gifts must be from income – although ‘income’ is not defined by the Revenue, it is interpreted as the net income after the payment of income tax, as per normal accountancy rules.
Generally, taxable income such as salary, pension income, rental income and investment income are considered appropriate for this purpose. The Revenue regard maturity proceeds from endowment policies, inheritances, and withdrawals from an investment bond, amongst others, as capital, and cannot therefore be taken into account when calculating surplus income."

https://www.longmores.law/articles/inhe ... cy%20rules.

There does seem to be some suggestion elsewhere in google that withdrawals from investments for periods shorter than 2 years might be considered income but no idea of the basis of that idea and I for one would certainly never consider tax planning that required me arguing that say regular disposals for CGT purposes were somehow income.









.

[clunk]

On the issue of what counts as income for the purposes of having surplus income to give away avoiding IHT, income in SIPPs does not count unless drawn, income in ISAs does count, even if not withdrawn, and share sales obviously are capital and do not count. I am mindful of this issue as I make a large monthly standing order to my daughter, calculated to be within the 'out of income' exemption.

That is an extremely valid and detailed set of points which I was completely unaware of. However, it does highlight how each of us have such differing circumstances.

Almost 20 years ago I lost both my wife and daughter in a fatal vehicle accident and therefor have no descendants or spouse. It is just me. My niblings will receive the proceeds from my estate, plus a few charities.

I know I will not receive a full state pension as I only have 30 years NI payments. I retired at 49 years old (life is too short) which was when only 30 years of NI were required for the full state pension. I will not be making up the missing years to achieve 35, rather invest religiously into my S&S ISA for several more years to come until I need or wish to draw from it. I currently live off (unearned) property rental income but have decided that that has run its course and plan to sell all next year.

[Gerry557]

I think I read my "fear" that dividend income I didn't count rather than my "hope" that it did regarding IHT gifting.

Thanks for all the links, I feel a bit better now. Maybe I should be more careful with my reading

I might have to look at keeping some records myself to help the executor.

[funduffer]

On the issue of what counts as income for the purposes of having surplus income to give away avoiding IHT, income in SIPPs does not count unless drawn, income in ISAs does count, even if not withdrawn, and share sales obviously are capital and do not count. I am mindful of this issue as I make a large monthly standing order to my daughter, calculated to be within the 'out of income' exemption.

That is an extremely valid and detailed set of points which I was completely unaware of. However, it does highlight how each of us have such differing circumstances.

Almost 20 years ago I lost both my wife and daughter in a fatal vehicle accident and therefor have no descendants or spouse. It is just me. My niblings will receive the proceeds from my estate, plus a few charities.

I know I will not receive a full state pension as I only have 30 years NI payments. I retired at 49 years old (life is too short) which was when only 30 years of NI were required for the full state pension. I will not be making up the missing years to achieve 35, rather invest religiously into my S&S ISA for several more years to come until I need or wish to draw from it. I currently live off (unearned) property rental income but have decided that that has run its course and plan to sell all next year.

You might want to take a look at buying additional years of National Insurance (post 2016). For around £800 (for each year of missing contributions) you will receive an indexed linked pension of around £5 per week for life. This is far, far better than any annuity, and much less risky than relying on dividend income.

Look up your position on the Government Gateway, and you should be able to determine what you could get to enhance your state pension.

Nothing wrong with tax free dividends from an ISA of course, once you have filled up your pension.

FD

[clunk]

I know I will not receive a full state pension as I only have 30 years NI payments. I retired at 49 years old (life is too short) which was when only 30 years of NI were required for the full state pension. I will not be making up the missing years to achieve 35, rather invest religiously into my S&S ISA for several more years to come until I need or wish to draw from it. I currently live off (unearned) property rental income but have decided that that has run its course and plan to sell all next year.

You might want to take a look at buying additional years of National Insurance (post 2016). For around £800 (for each year of missing contributions) you will receive an indexed linked pension of around £5 per week for life. This is far, far better than any annuity, and much less risky than relying on dividend income.

Look up your position on the Government Gateway, and you should be able to determine what you could get to enhance your state pension.

Nothing wrong with tax free dividends from an ISA of course, once you have filled up your pension.

FD

This is an extremely valid argument, but again highlights how each of us have very differing circumstances.

I have zero intention of spending the remaining autumn and subsequent winter of my life living solely in the UK. To say I despise what the UK has become since I stopped working 12 years ago (at 49) would, perhaps, be an overstatement, but I am disgusted and it repulses me.

Any social security agreement between the UK and the small group of countries where I already spend chunks of my years does not exist. I have no wish or desire to contribute willingly to HRMC than I already have done or, by law, am required to do.

The Government gateway tells me £xxx,xx per week for 30 years NI contributions. But this does not reflect the periods when I was contracted out of SERPS so it will likely fall short of that. Combine that with stories of incorrectly topped-up NI years for zero gain. When the day comes, auto-pay whatever it is to my foreign account and inflation can eat it away until it eventually falls into obscurity, just as the UK will, over time. To me the state pension is just a cherry on the top, while it lasts.

I realise for many this post isn't all about 'dividend stocks for older investors', but for me it is.

My SIPP reaching the LTA is unlikely to happen while a pittance of only £2,880 per year can be added as rental income is apparently un-earned, despite having to earn and be taxed on the monies going towards those properties.

A state pension-beating S&S ISA based upon HYP can be achieved in around half a decade. I was stuck overseas during covid and therefor unable to change accounts which had switched into pittance rates or to add any further to my ISAs. Now regularly back in the UK I am maximising them again and transferred all existing cash ISAs to an S&S ISA so the process is already well under way and back on track.

Asset-wise I am well-off, but cash-wise it has its limitations based upon rental income. 3 mortgage-free rental properties will be unloaded next year. Despite excellent tenants all round and all via a management agent. The desire to unload them is very real, so real that I've decided the time has come to exit the rental market and I have 18 months to do so.

The up-and-coming renters reform bill on top of all the other negatives over recent years piled upon landlords, the squeeze on CGT allowances, government elections looming in January 2025 of which, essentially, the only choices are bad, or worse.

Tempting older workers back to work (so they can contribute more to the coffers). Errm, no thanks. But I did smile when they baulked at not reneging on the triple lock. The 10.1% bump almost makes up the difference of my NI shortfall.

Once all proceeds are collected from property disposals and the subsequent CGT paid I can essentially cash-out of the UK in terms of illiquid investment assets. I am and will remain conscious of time spent within the UK so as not to lose any benefit of being a UK resident, at least while it is beneficial for me to do so.

[Charlottesquare]

You might want to take a look at buying additional years of National Insurance (post 2016). For around £800 (for each year of missing contributions) you will receive an indexed linked pension of around £5 per week for life. This is far, far better than any annuity, and much less risky than relying on dividend income.

Look up your position on the Government Gateway, and you should be able to determine what you could get to enhance your state pension.

Nothing wrong with tax free dividends from an ISA of course, once you have filled up your pension.

FD

This is an extremely valid argument, but again highlights how each of us have very differing circumstances.

I have zero intention of spending the remaining autumn and subsequent winter of my life living solely in the UK. To say I despise what the UK has become since I stopped working 12 years ago (at 49) would, perhaps, be an overstatement, but I am disgusted and it repulses me.

Any social security agreement between the UK and the small group of countries where I already spend chunks of my years does not exist. I have no wish or desire to contribute willingly to HRMC than I already have done or, by law, am required to do.

The Government gateway tells me £xxx,xx per week for 30 years NI contributions. But this does not reflect the periods when I was contracted out of SERPS so it will likely fall short of that. Combine that with stories of incorrectly topped-up NI years for zero gain. When the day comes, auto-pay whatever it is to my foreign account and inflation can eat it away until it eventually falls into obscurity, just as the UK will, over time. To me the state pension is just a cherry on the top, while it lasts.

I realise for many this post isn't all about 'dividend stocks for older investors', but for me it is.

My SIPP reaching the LTA is unlikely to happen while a pittance of only £2,880 per year can be added as rental income is apparently un-earned, despite having to earn and be taxed on the monies going towards those properties.

A state pension-beating S&S ISA based upon HYP can be achieved in around half a decade. I was stuck overseas during covid and therefor unable to change accounts which had switched into pittance rates or to add any further to my ISAs. Now regularly back in the UK I am maximising them again and transferred all existing cash ISAs to an S&S ISA so the process is already well under way and back on track.

Asset-wise I am well-off, but cash-wise it has its limitations based upon rental income. 3 mortgage-free rental properties will be unloaded next year. Despite excellent tenants all round and all via a management agent. The desire to unload them is very real, so real that I've decided the time has come to exit the rental market and I have 18 months to do so.

The up-and-coming renters reform bill on top of all the other negatives over recent years piled upon landlords, the squeeze on CGT allowances, government elections looming in January 2025 of which, essentially, the only choices are bad, or worse.

Tempting older workers back to work (so they can contribute more to the coffers). Errm, no thanks. But I did smile when they baulked at not reneging on the triple lock. The 10.1% bump almost makes up the difference of my NI shortfall.

Once all proceeds are collected from property disposals and the subsequent CGT paid I can essentially cash-out of the UK in terms of illiquid investment assets. I am and will remain conscious of time spent within the UK so as not to lose any benefit of being a UK resident, at least while it is beneficial for me to do so.

If not topping up state pension years because you intend to say retire overseas and lose pension uplifts ( maybe I have misunderstood) why chase ISAs as if you become non resident these may well not be recognised as tax exempt wherever you move?

[stacker512]

Source - my own income-tracking spreadsheet

Thank you for that post, Itsallaguess. It's given me inspiration to do something similar in my spreadsheet.
One question, how do you make your graph looking so nice?
My graph looks a bit ugly in LibreOffice, the grid lines are only horizontal and the dates on the x-axis seem to be skipping every 3 or 4 months. And the data serie just seems somehow jumpy, can see more of the square markers (even though I've reduced their size) rather than the line itself.

[Itsallaguess]

Thank you for that post, Itsallaguess.

It's given me inspiration to do something similar in my spreadsheet.

One question, how do you make your graph looking so nice?

My graph looks a bit ugly in LibreOffice, the grid lines are only horizontal and the dates on the x-axis seem to be skipping every 3 or 4 months.

And the data series just seems somehow jumpy, can see more of the square markers (even though I've reduced their size) rather than the line itself.

Hi there,

I've not got a lot of experience with LibreOffice, but I've just had a play with my 'Portable' version of LibreOffice Calc, and have come up with the following identical chart to my Excel one -



Some brief instructions to hopefully be able to follow -

1. Compile your income-data into three columns first. My data was in the following format, which will help with the later instructions if you were to initially repeat the data-set -



Source - my own version of LibreOffice Calc

2. Select the cells A1 to C62 (or whatever your full range is, including some intentional 'empty' months at the back-end so we can fill in some ongoing income-data at a later time...)

3. Select Insert / Chart

4. Chart Type = Line / Points and Lines

5. Data Range = Leave at default for now (should show two chart lines at this stage...)

6. Data Series = Leave at default

7. Chart Elements = Untick 'Display Legend'

8. 'Finish' Chart Wizard

9. On the chart, right-click the lower line element and select 'Cut' (Removes unwanted YEAR line)

10. Stretch outside edges of chart window - horizontal stretch to almost full screen

11. Left-click inner chart area, then stretch horizontally within the chart-window itself, until all months listed on X-axis

12. Right-click X-axis month area at bottom, and select 'Insert Major Grid' - should then display vertical monthly grid-lines

13. Right-click Y-Axis income area on left, and select 'Format Axis'

14. On 'Scale' tab of Y-Axis window, un-tick 'Automatic' on 'Minimum' field, and enter an income level other than '£0', to help avoid too much un-wanted space under the income chart line

15. Staying on the 'Scale' tab of the Y-Axis window, un-tick 'Automatic' on the 'Major Interval' field, and enter an appropriate rounded figure for the horizontal income grid-lines

Those are the steps I took to generate the above chart picture, so hopefully they're not too far away with your own version of LibreOffice.

Happy to help if anything isn't clear, so let me know how you get on...

Cheers,

Itsallaguess