Latest news with #TRADING212
The Independent
2 days ago
- Business
- The Independent
How much risk is too much risk when it comes to your money?
SPONSORED BY TRADING 212 The Independent Money channel is brought to you by Trading 212. In investing, the general rule is that the more risk you take, the greater the potential rewards. But the stock market can go down as well as up, and the idea of losing money is never pleasant. That's why so many Brits put their money into cash savings rather than the stock market. According to latest figures from the Office for National Statistics, more than 8 million of the 12.4 million Isas opened in 2022-23 were cash accounts. But to give your money the best chance of growing over the long-term, you'll need to invest it - and that means taking a degree of risk. The question is: how much? You're already taking risk - but the wrong sort It is easy to assume that leaving cash in the bank is completely safe, but this is a fallacy. As inflation pushes up the cost of living, the 'real terms' value of cash - its purchasing power - is eroded away. If inflation is 4 per cent then something that costs £100 today, will cost £104 next year, so your £100 in the bank could no longer afford it. The key is to make sure your money is growing at a faster rate than inflation so your wealth keeps pace with the rising cost of living. Research shows that investing in the stock market is the most reliable way to do this over the long-term. According to the Barclays Equity Gilt Study, which looks at data going back to 1899, investing in equities has delivered annualised returns of 6.8 per cent over the past decade after factoring in inflation, while cash has lost 1 per cent a year. Over 50 years, the stock market has delivered annual returns of 8.1 per cent compared to just 0.6 per cent for cash. Meanwhile, research by IG Group found that someone who had maxed out their Isa allowance every year since 1999 would have £275,659 today in real terms if they had put it in cash - but £410,051 if they had invested it in the FTSE 100. 'If you don't take enough risk for long-term financial goals, such as retirement, you may end up with a much smaller pot,' says Craig Rickman from the wealth manager interactive investor. Fear of losing money is a key reason so many savers are reluctant to invest. But risk is different to 'risky'. Many people associate the idea of 'financial risk' with 'gambling', but this is not necessarily the case. Risky is the chance of losing some or all of your money in the hope of big gains (think: putting it all on red at the casino). Risk, on the other hand, is the potential for ups and downs along the way, known as volatility. This is what we see on the stock market: it tends to rise over the long-term, with short-term dips along the way. As long as you don't need to access your money during a dip, you can ride this out in the hope of greater gains in the future. Younger investors in particular are often told to take more risk because they have more time to wait out those ups and downs. Claire Exley, head of financial advice and guidance at Nutmeg, says: 'What matters really is the value of your investment when you need the money, rather than the movements in value along the way.' Investors need to weigh up how much risk they need to take to generate the returns they hope to achieve, while still being able to sleep at night during those market dips. However, it is also important to pay attention to your gut instincts; some people are naturally more risk averse and won't be comfortable with any volatility, regardless of what the data shows. What to invest in Diversification is key to a smooth investment journey, especially for those just starting out. This means spreading your money across different companies, countries and assets. A broad global tracker fund, which invests in thousands of companies across the globe for a low cost, is a good place to start. To further spread your risk, you can add in different 'asset classes' (types of investment), such as bonds, gold or property. Many investing apps, such as Moneyfarm, Nutmeg, Dodl and Wealthify offer readymade portfolios that create an appropriate mix of investments, which is a good option if you don't feel confident choosing your own. Free risk questionnaires can help you determine your risk tolerance. These ask questions such as how long you plan to invest, whether you would describe yourself as a cautious person, and how you would feel about short-term fluctuations. Nutmeg, an investing app, said the average risk level for investors aged 18 to 29 is seven out of 10. This portfolio has 71 per cent in equities, 26 per cent in bonds and 3 per cent in cash - it has returned 71 per cent over the past 10 years. That compares to 22.2 per cent for Nutmeg's Level 3 portfolio and 120 per cent for Level 10. Before you start investing, experts typically advise having three to six months' of outgoings in an easy-access account in case of an emergency. Investing should be for a minimum of three to five years, so don't invest money you might need to access. Rickman says: 'Ultimately, risk appetite is a personal thing. Some people are happy to stomach heavy falls in value for the potential to make more money, and others are more cautious, favouring security and certainty over big potential returns.'
The Independent
6 days ago
- Business
- The Independent
Self-employed workers face key tax date next week - and it's costly to miss
SPONSORED BY TRADING 212 The Independent Money channel is brought to you by Trading 212. If you work for yourself, you're likely to be familiar with that formidable phrase 'payment on account'. This is a payment you make to HMRC twice a year, by the end of January and the end of July, towards your next tax bill. Although there are 4.4m self-employed people in the UK, about 12m people file a self-assessment tax return each year. However, you'll only need to make a payment on account if your self-assessment tax bill is more than £1,000 and less than 80 per cent of your tax was collected at source (such as PAYE). First important point: If you're new to self-employment, don't forget that you need to make your first payment on account when you submit your first self assessment tax return, in addition to any tax and National Insurance you may owe for the previous tax year. Why do you have to make the second payment on account in July? The system is designed to stagger your tax payments so you don't end up with an even larger tax bill at the end of each January. July's payment covers the tax that HMRC expects you to be liable for in the 2025-2026 tax year, based on the information you would have provided in your 2024-2025 tax return. When you file your 2024-2025 tax return by January 31, 2026, the payment on account you made in July 2025 will count towards your new tax bill, which should cover all remaining tax owed for the 2024-2025 tax year and the first payment on account for the 2025-2026 tax year. Second important point: HMRC's initial calculation summary may not immediately include any payments on account you made for the previous July. However, after you submit your return, these payments are usually credited correctly against your final tax bill. As long as you made the correct payment in July, don't be alarmed if the initial calculation is much higher than expected. This doesn't mean you owe extra money - it's just a technical fault with how HMRC initially calculates your tax return. Unfortunately, this calculation is much more likely to be correct if this is your first tax return. If you think your income is likely to be lower this year Ask HMRC to reduce your payments on account in your self-assessment tax return or by submitting form SA303. Naturally, if your final income isn't as low as expected, your next payment on account could be significantly higher and you may have interest to pay on top. How to make your second payment on account for July Log in to your self-assessment account to check how much you owe. Next, choose the 'pay by bank account' option, which will direct you to your online or mobile banking account to make a payment to HMRC Shipley. If you don't have enough funds to make the second payment on account by July 31, you need to act now. You may be able to set up a payment plan with HMRC to help spread the cost of your tax bill You must initiate this process before the deadline to avoid paying late payment interest, which is currently 8.25 per cent as of July, 2025 Call HMRC's Business Payment Support Service on 0300 200 3825 as soon as possible. Alternatively, get in touch with the Business Debtline for free, impartial advice if you're self-employed or a small business owner in England, Wales or Scotland. Use Advice NI for Northern Ireland. Did you know you can reduce your tax bill by claiming expenses for heating, insurance, council tax and other bills? These costs must be necessary for running your business, so you can't claim expenses for anything that isn't strictly for business use. As an example, if you purchased a £1,000 laptop during the 2024-2025 tax year and use it for work purposes 50 per cent of the time, you can reduce your taxable income by £500. This doesn't mean you'll get £500 off your tax bill, unfortunately, but if you earned a gross income of £40,000, this expense would reduce your taxable income to £39,500, saving you about £130 in tax (these savings will vary depending on your turnover and expenses). Where possible, try to complete your self-assessment tax return as early as possible. HMRC will usually invite you to submit it shortly after the tax year begins. This will give you more time to plan and make sure you have enough cash for your next payment. When investing, your capital is at risk and you may get back less than invested. Past performance doesn't guarantee future results.
The Independent
16-07-2025
- Business
- The Independent
Lifetime ISA vs personal pension: Which is better for higher retirement income?
SPONSORED BY TRADING 212 The Independent Money channel is brought to you by Trading 212. If you don't qualify for an employer pension, or you're looking for a way to supplement yours, both a Lifetime ISA and a personal pension, such as a SIPP (a self-invested personal pension), can be effective retirement planning tools. They have a lot in common: they're both tax -efficient, they hold a similar range of investments - Lifetime ISAs are a little more restricted - and most compellingly, contributions to either are topped up by 25 per cent, albeit in different ways. At first glance, it may seem that you could pay the same amount into one or the other and they would deliver an equal income in retirement. This isn't the case. Let's look at which could provide a higher income for you, and why. Which allows you to save more? A Lifetime ISA allows you to pay in up to £4,000 each year from the age of 18 until you turn 50. If you paid in the maximum each year, the total would be £128,000. You must open one before age 40. Contributions count towards your overall ISA allowance. Pensions usually allow you to pay in a lot more, and you can pay in for longer. Various limits apply in different circumstances, but the standard annual allowance is £60,000. Which offers a better 'bonus'? When you make a contribution into a Lifetime ISA, the government adds a 25 per cent bonus. So, if you pay in £800, the government bonus will be £200. You can read more on LISAs here. Pension contributions don't benefit from a bonus, but they are eligible for tax relief, which has a similar effect. If you make a contribution of £800 into a personal pension, your pension provider claims and adds £200 from HMRC (the equivalent of basic-rate income tax). If you're a higher-rate or additional-rate taxpayer, you'll be entitled to more tax relief. This won't be claimed by your pension provider but you can claim it back through your self-assessment. Which can be accessed first? You can freely access the wealth within your Lifetime ISA after the age of 60. Before that age, you can access it in two scenarios: You're buying your first home, at a value of no more than £450,000 You pay a 25 per cent withdrawal charge. Note that the 25 per cent withdrawal charge does not equal the bonus, but actually exceeds it: If you pay in £800, you'll receive a bonus of £200, giving you a total of £1,000 If you now withdraw £1,000, you'll pay a penalty of £250 (25 per cent of the total) You'll have £750 remaining, leaving you £50 worse off. Pensions usually cannot be accessed before the age of 55 (rising to 57 in April 2028) unless you have a serious health condition. It can be a more complex process. How is the income from each taxed? Here is, perhaps, a Lifetime ISA's most appealing characteristic: money withdrawn from them isn't considered income, so it won't be taxed. After the age of 60, you can take as much cash as you like, until it runs out, and you won't pay a penny of it to HMRC. Pension income can be taxed in various ways. A more full explainer is here but to simplify, you can usually take 25 per cent of your pension tax-free, while the other 75 per cent is taxed as income as and when you take it. You might therefore pay tax at 20, 40 or 45 per cent, depending on your other income. Which will provide a higher income? As you've probably gathered, this is a question of the trade-off between the tax relief (or bonuses) you'll receive while saving and the tax you'll pay (or not) when withdrawing. A personal pension is usually the better choice for higher-rate and additional-rate taxpayers. The tax relief on your pension contributions, at 40 or 45 per cent, more than offsets the tax you'll pay on your pension income, particularly if you move into a lower tax bracket after you retire. For a basic-rate taxpayer, the reverse is true. Let's look at an example: If you saved up £100,000 over your working life, whether you used a Lifetime ISA or personal pension, you would end up with £125,000 (we'll ignore investment growth to keep things simple). With a Lifetime ISA, you could withdraw this amount over any period, after the age of 60, without paying tax. You'd be able to take the full £125,000. With a personal pension, only 25 per cent (£31,250) would be tax-free. The remaining £93,750 would be taxed as it's withdrawn. If you withdrew it over several years, remaining a basic-rate taxpayer throughout, the total tax would be £18,750. Of your £125,000, you'd only get back £106,250. While this gives a clear advantage to the Lifetime ISA, there are other factors to consider: With an annual limit of £4,000 on contributions, a Lifetime Isa alone may not allow you to save enough as you need for retirement Since you can't access your Lifetime Isa penalty-free until 60, you may have to wait longer to retire You can only pay in until you turn 50, while you might want an option you can pay into after this. Given all the benefits and drawbacks, you may decide that both products have a role in your retirement plan - especially given there may be changes to the Lifetime ISA ahead.
The Independent
30-04-2025
- Business
- The Independent
Lifetime Isas, how they work and how to make the most of free top-up money from the government
SPONSORED BY TRADING 212 The Independent Money channel is brought to you by Trading 212. Under 40? Thinking about buying your first home or putting money aside for your pension? You might want to consider investing in a Lifetime ISA (Lisa). This is because the government gives you a bonus of 25 per cent on top of everything you put in. That means you could receive £1,000 of free money each year, if you deposit the maximum amount of £4,000. However, there are a few catches. You can only use your Lisa savings to fund the cost of your first home or your retirement. There is a penalty for making any withdrawals that fall outside of these rules, unless you are terminally ill. Here's how Lisas work, who they're best for and how to make sure you're getting the most out of yours. What is a Lifetime ISA? This is a type of Individual Savings Account (Isa) to help you save towards your first home or for retirement. Anyone aged between 18 and 39 can open one and save up to £4,000 each tax year, which runs from 6 April to 5 April the following year. In return, the government rewards you with a 25 per cent bonus – so up to £1,000 per year. Your contributions to a Lisa count toward your overall £20,000 annual Isa allowance. Better still, you can keep paying into your Lisa and receiving the bonus until you turn 50. The bonus is added to your account every month to give your Savings a regular boost You can receive the same bonus whether you open a Stocks and Shares Lisa or the cash version Stocks and shares tend to deliver better returns over longer time periods But here's the fine print: Your Lisa savings can only be used without penalty in three circumstances: To buy your first home (up to £450,000) After you turn 60 If you're terminally ill If you withdraw the money for any other reason, you'll be hit with a 25 per cent penalty - and that doesn't just eat up your bonus, it also erodes your savings too. For example, if you put £4,000 into a Lisa, this would have been boosted to £5,000 thanks to the government bonus. But if you withdrew the £5,000 outside the rules, you would get hit with a £1,250 penalty (25 per cent) - losing both the £1,000 government bonus and £250 of your own money. Who is a Lisa best for? A Lisa works best for two types of savers: either first-time buyers planning to buy a property, or long-term savers who are happy to lock away their money until they hit 60. If you're confident you'll use your Lisa savings for either of these purposes, the bonus gives you a 25 per cent return on your money, irrespective of any earnings from interest or investment growth. And, if you're a couple and as long as you're both first-time buyers, you can each use a Lisa to boost your savings. That means there's up to £2,000 of free government money up for grabs each year. But if you think you might need to access these savings early – or your property budget is likely to exceed the £450,000 cap – you may want to consider investing in a regular ISA instead. Lisa considerations The average house price in the UK in February 2025 was £268,000 - comfortably below the Lisa cap of £450,000. However, there are significant regional disparities. In England, the average is £292,000, compared to £207,000 in Wales, £186,000 in Scotland and £183,000 in Northern Ireland. But in London, the average is £555,625, well above the Lisa cap and more than three times higher than the average for the North East, £160,452. Using your Lisa savings to buy a home which costs more than £450,000 will land you with the 25 per cent penalty. How to make the most of a Lisa If you decide a Lisa is right for you, here's how to get the best out of it. Start as early as you can. Opening a Lisa at 18 gives you up to 32 years to benefit from the bonus – even if you only use it to save for retirement. But even if you start at 30, you could still get up to £20,000 in free money. And if you're saving for a home, just three to five years of contributions could give your deposit a healthy boost. Know what you're saving for. If you plan to buy a home in the next few years, a cash Lisa might be the safer option, as you won't risk losing money if the market drops. If you're saving for retirement and have decades ahead, a stocks and shares Lisa could offer more growth over time. Combine it with other accounts. You can still use your full £20,000 annual Isa allowance alongside the Lisa. For example, save £4,000 in a Lisa and you'll still have an annual tax-free allowance of £16,000 in a cash or investment Isa. Avoid dipping in early. The 25 per cent penalty means you'll get back less than you put in if you don't follow the rules. Only open a Lisa if you're sure you can commit. Where can you open a Lisa? Lisas aren't offered by every bank or provider, but there are still some good options out there. The likes of Moneybox, investor platform AJ Bell, their Dodl app for newer investors, Nutmeg who offer a managed investment Lisa and the more established names like Hargreaves Landsdown or Skipton Building Society all offer different types of these accounts. Ultimately, if you're under 40 and have a clear goal, opening a Lisa is one of the best ways to boost your savings – but only if you use it exactly as intended. Otherwise, you may do better considering other tax-free opportunities. When investing, your capital is at risk and you may get back less than invested. Past performance doesn't guarantee future results.
The Independent
30-04-2025
- Business
- The Independent
Four ways to invest in property without becoming a landlord
SPONSORED BY TRADING 212 The Independent Money channel is brought to you by Trading 212. The appeal of managing your own buy-to-let portfolio has been hit in recent years with increased taxes and restrictions on reliefs that have dented landlord profits, as well as increased regulations. The Renters' Rights Bill currently going through Parliament will also introduce tougher requirements to evict renters and limit mid-contract rent rises. All this is driving many landlords to exit buy-to-let. But the returns from property can still be attractive, especially compared with volatile stock markets. Luckily, there are ways to invest in property without the added responsibilities and headaches of being a landlord. Here is what you need to know - with plenty of options to start smaller than having enough for a full house deposit. From housebuilders such as Persimmon to property websites such as Rightmove, there are plenty of listed companies on the London Stock Exchange in the housing sector that you could put money into. You would then share in their success if the share price grows and if they pay dividends. Of course, you will also lose money if their share price drops. There are extra responsibilities with shares though. You will need to build a diversified portfolio across different sectors so that you don't lose all your money if the property sector crashes. There may also be fees to pay for holding your shares on an investment platform, which can eat into your returns. Property funds If you don't have the time or confidence to research shares, you can get exposure to the property market through property funds. These are run by fund managers who will build a diversified portfolio typically invested in commercial properties such as offices, warehouses, industrial units or shopping centres – rather than housing. Some will either invest across a mix of property sectors, others special in a narrow part of the market or a particular region. Jason Hollands, managing director of investment platform Bestinvest, said: 'Physical property funds offer investors diversification beyond equities and bonds and a stream of rental income can be useful for those who are retired. 'With many people already having significant exposure to residential property through their own home and mortgage, investing in a commercial property funds provides a slightly different dimension. Here they can benefit from the security of long leases by business tenants and accompanying rental income.' When choosing a property fund, Hollands said the quality of the tenants and the length of their unexpired leases - the longer the better - low vacancy rates and the exposure to attractive locations are important considerations over portfolio resilience. One big risk though is that property is an illiquid asset so you cannot sell in a hurry in the way you could decide to ditch some shares. Hollands added: 'A fund can't part-sell an office block or warehouse it owns and in times of uncertainty this may be difficult to achieve at a reasonable price. Open ended property funds have therefore experienced periods in the past when they have had to suspend dealing – the ability for investors to take their cash out – when large numbers of investors want to take their cash out at the same time. 'Even in stable times, such funds have to hold significant cash balances to address day to day demands for possible withdrawals which can water down returns.' There are also investment funds and exchange traded funds that invest in property stocks. Both types of property fund will have manager and platform fees to consider. An alternative to property funds are real estate investment trusts (REITs). This is a type of investment trust - backing a mix of commercial properties - that is listed on a stock exchange. Rather than your money going directly into properties, you are purchasing a share in the trust and share in the ups - as well as the downs - of its share price and market performance. Many REITs also pay regular and attractive dividends, often quarterly. Nick Britton, research director of the Association of Investment Companies (AIC), said: 'Being a landlord isn't for passive income – you will find yourself running a property business, grappling with complex tax, legal and regulatory requirements. By contrast, investing in a REIT is as easy as buying any other share. 'A particular perk is that REITs are very tax-efficient – there is no tax to be paid by the REIT itself, so if you hold REIT shares in an ISA or pension you'll effectively receive rental profits tax-free. 'Although you can sell the shares at any time, REITs should still be seen as a long-term investment. Their share prices will fluctuate and when the property market is in the doldrums, this will be reflected in the prices. You need to be patient and ideally take a five to 10 year view.' Property funds and shares can be held in an ISA, so any returns can be taken tax-free, unlike direct rental income. Peer-to-peer lending You could also fund buy-to-let or development loans directly through peer-to-peer lending platforms such as Kuflink and LandlordInvest. These can offer double digit returns for funding landlords or developers directly. However it can also be more risky and you need to check the P2P lending platform is regulated by the Financial Conduct Authority (FCA). Risks include borrowers falling into arrears and even defaulting, potentially leaving you with nothing. There is also no Financial Compensation Scheme (FSCS) protection if a platform goes bust. There are also platforms such as TAB Property that provide fractional ownership of assets such as hotels and office spaces, as well as residential property. Any returns earned from a property's income will be paid in proportion to your stake. Duncan Kreeger, chief executive of TAB Property, said: 'Fractional ownership now allows investors to enter high-grade real estate markets without the usual high minimum investment thresholds. This approach diversifies exposure and mitigates the risk of putting all your eggs in one basket. 'For anyone considering this type of diversification, my advice is to start with a clear investment plan. Determine your investment horizon and desired returns. Look for platforms offering access to diverse asset classes and conduct thorough research on each opportunity. 'Understand the terms, risks, and potential rewards associated with your chosen investments.' When investing, your capital is at risk and you may get back less than invested. Past performance doesn't guarantee future results.
