If you have a substantial portfolio, the difference in the costs charged by the most inexpensive platform and the most expensive platform can add up to thousands of pounds. Additionally, some platforms will charge you a few pounds when you buy or sell an investment, and others will impose what are known as “exit fees,” although the latter is becoming an increasingly uncommon practise.
What kind of costs are involved while working with a financial adviser?
There are many different fee structures that financial advisers utilise, but the most common ones are as follows:
The costs charged by the adviser themselves; these may take the form of a flat rate, an hourly rate, or, more typically, a percentage of your total investments.
A fee that is imposed by the platform that is holding your investments; this fee is likely to be charged as a percentage of the total value of your investments.
Again, fees levied by the funds and trusts you own; these will most likely be expressed as a percentage of the total amount.
At the very least on an annual basis, you ought to get a statement that details the expenditures in question. This should be represented as a percentage, as well as the corresponding value in pounds and pence.
These expenses could be compensated for by the sale of some of your investments or through the utilisation of cash that has been accumulated through dividends.
Will I be required to make tax payments on the gains on my investments?
It is possible that you will still be required to pay taxation even after you have settled all of these fund costs.
You are exempt from paying dividend tax on dividend income up to £2,000 per year; however, if your dividend income exceeds this threshold, you will be required to pay dividend tax at a rate of 7.5 percent for basic rate taxpayers, 32.5 percent for higher rate taxpayers (33.75 from April 2022), or 38.1 percent for additional rate taxpayers (39.35 percent from April 2022).
When you sell funds, you can also be responsible for paying taxes on your capital gains. You are only need to pay 10 percent of your capital gains income above £12,300 if you are a taxpayer at the basic rate. If you are a taxpayer at the higher or additional rate, you are required to pay 20 percent of your capital gains income (18 percent or 28 percent for residential property respectively).
Rather than depending on tax allowances, you can protect your fund earnings from both of these charges by placing all of your funds in an Isa that is designated for stocks and shares.