Basic features of Investment Trusts.
Investment Trusts are companies that buy and sell shares in other companies. They are are traded as shares and listed on London Stock Exchange.
When buying shares in an investment trust company you become a shareholder and your shares will rise and fall in value according to supply and demand for the shares.
Investment trusts enable you to spread risk by investing in numerous other companies – without the hassle of having to buy, monitor and sell shares individually.
Investment Trusts costs and taxation.
You can have shares in as many different trusts as you like.
Charges include a bid/offer spread of around 5% for buying and selling shares and a management charge of between 0.3% and 0.5% per annum.
The overall charges of an investment trust are generally cheaper than a unit trust.
These are intended as a medium to long term investment.
You are not certain to make a profit, you may lose money / make a loss.
Level and bases of and reliefs from taxation are subject to change.
The investor is taxed as for any other share – Dividends are received with a tax credit of 10%. Non-taxpayers cannot reclaim this tax. Lower rate and basic rate tax payers have no further liability. Higher rate taxpayers are liable to a further 22.5% on the grossed up dividend.
What are the benefits of investment trusts?
Your money is pooled with other investors money, reducing costs and increasing investment opportunities.
- The risk is spread because you are investing in a wide range of shares.
- Managers. expertise means your money is invested effectively.
- The charges are low so more of your money starts working from the moment you invest.
You can invest small amounts from as little as £25 a month or lump sums of £250. Combine the benefits of investment trusts and ISAs and you have an effective and tax-efficient way to invest in the stockmarket.
Investment trusts and ISA's
You CAN hold investment trusts in a self select ISA - subject to the general ISA rules for qualifying share investments.
Take out a self-select maxi-ISA and you can invest your full £7,000 in investment trusts. Split your money into cash or life insurance via a mini-ISA, and the maximum you can invest is £3,000. Many investment trusts allow regular monthly savings from as little as £25, whereas many unit trusts set a minimum £50 for regular contributions, often rising to £250 on many popular funds.
There are two main types of ISA - 'maxi' and 'mini'. ISAs act like wrapping paper, allowing you to invest or save a certain amount without having to share the proceeds with the taxman; there is no capital gains or income tax to be paid on returns - one of the few breaks for taxpayers. The investment options within each type of ISA are stocks and shares, cash and insurance.
A maxi ISA must be arranged with one provider and allows you to stash up to £7,000 in stocks and shares or hold a combination of up to £3,000 cash, up to £1,000 in insurance and the remaining £3,000 in stocks and shares. You can open mini ISAs with different providers with a choice of £3,000 in cash, £3,000 in stocks and shares and £1,000 insurance. The option to invest the lot in stocks and shares does not apply to mini ISAs. The key thing to remember is that you cannot open mini and maxi ISAs in the same tax year (6th April - 5 April).
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