Some people don’t realise how lucky they are to have the Stocks and Shares ISA. It allows Britons to invest anything up to £20,000 a year and take all our returns free of tax for life.
That means no income tax and no capital gains tax to pay, ever. ISA investors can even pass on their portfolio to a partner on death. It will ultimately become subject to inheritance tax, but only for those whose total assets exceed the IHT nil-rate band, currently £325,000.
Please note that tax treatment depends on the individual circumstances of each client and may be subject to change in future. The content in this article is provided for information purposes only. It is not intended to be, neither does it constitute, any form of tax advice. Readers are responsible for carrying out their own due diligence and for obtaining professional advice before making any investment decisions.
My Stocks and Shares ISA dream
The Stocks and Shares ISA is a great deal, and a terrific way to invest in FTSE 100 shares. If I didn’t have any savings at 40, the first thing I would do is open one via a low-cost online platform. It only takes a few minutes and a few basic details such as a National Insurance (NI) number and debit card details.
If I didn’t have any shares at all, I’d start simple and buy a spread of UK stocks by purchasing a FTSE All-Share tracker. I’m past that phase now and my focus is on buying individual shares in the hope of generating a superior return to the overall market.
I went on a share buying spree in October when the FTSE 100 dipped and shares were cheap. Now I’m reaping the rewards as markets recover in the run-up to what I’m hoping will be a positive end to the year.
Right now, I don’t have the cash to buy more shares. My Christmas shopping list now contains only food, drink and presents. But once I’ve paid off my festive debt in early 2023, I know what my priority is going to be and it won’t have any tinsel on it.
Once I’ve covered my essentials, I’m going to invest every spare penny I can find into stocks and shares, regardless of whether the FTSE 100 is rising or falling at the time.
History shows that, over the longer run, stock markets beat rival forms of investing, everything from gold to property to cash. Equities have plenty of ups and downs along the way, as we have seen this year. My capital is not guaranteed in any way. That doesn’t trouble me because I would never invest for a period of less than five years and, ideally, 20 or 30 years (or longer).
I’m after passive income
At age 40, a newbie investor still has more than 25 years to build the wealth they need for retirement. If that was me, I would buy FTSE 100 shares and reinvest all the dividends I received back into my portfolio for growth.
That would turbocharge my returns, and give me a nice pot of money to generate a passive income after I finally stop working.
After recent political and economic troubles, there are plenty of dirt-cheap stocks available on the FTSE 100 and Fool.co.uk is full of tips and recommendations.
That’s where I’d start, and I wouldn’t stop. I don’t have the cash to invest anything like the £20,000 Stocks and Shares ISA limit, but I’ll do as much as I can. 2023 is fast approaching, and I plan to use it.
