Pension Plan & ISA - UK IBD
Hi,
I am a continental student who has secured a FT offer and has some questions regarding to how to save/invest money. I have read some of the older threads but I am not sure about the following:
-
Does ISA also protects dividend gains from being taxed? Once you leave the UK are you still elegible to keep those savings as tax-free (if I am being taxed in another country)
-
Pension Plan: I understand that if you do personal contributions this deducts taxes paid - as if you were receiving a lower rage (up to 40k), and that this money is supposed to be taken after you are 55 years old.
- What would happen if I decide to use that money earlier to pay my stuff? Is it all taxed at 55%?
- If I decide to take all of it as a lump sum / one off payment, how would it be taxed? I really dont find useful information about this
- Would you advice to max pension after maxing the ISA every year?
Thanks!
Yes, dividend gains under ISA do not impact your dividend allowance and are thus tax-free. You also don’t pay capital gains tax when selling shares from an ISA.
Contributing to a pension reduces your salary-before-tax. Simply put, less of your salary is taxed at the top bracket.
You can withdraw 25% of your pension once you hit 55, tax-free as a lump sum. Withdrawing more, or withdrawing earlier will make you liable to income tax.
Max out your pension contributions to the amount that your employer will match. i.e. if they will match up to 10%, put 10% in. You’re literally getting an instant 100% return on investment that way, with that money to appreciate as the pension matures.
Good points
Do US BBs match your pension contributions in the UK?
You’ll be hard-pressed to find a large company that doesn’t match your pension contributions up to a certain point in the UK. It’s a basic benefit that most companies have to offer to stay competitive.
My bank contributes 8% of my salary but does not match my contributions.
.
At one of those, bank matches over 2x what I contribute
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