Like almost all income, income from shares in the form dividend payments are taxable.
There are two main ways to earn money from the stock market: capital gains and dividend income. Capital gains is realised when a share is sold for more than the purchase price. Meanwhile, dividend income is when a company’s profits are shared with its shareholders (this is discussed in a lot more detail in another article).
Tax has to be paid on dividends received over a certain threshold (which stood at £2,000 at the time of writing this article). But it gets more complicated:
Basic rate tax payers pay tax at a rate of 7.5% on their dividend income above £2,000
Higher rate tax payers pay 38.1% tax on their dividend income above £2,000
Additional rate tax payers pay 38.1% tax on their dividend income above £2,000.
However, if investors opt to receive dividend payments into their ISA (instant savings account) then no tax is payable on dividends.
ISA accounts are offered by pretty much every bank in the UK. In fact, there are some financial institutions (such as Hargreaves Lansdown) that are not banks, but still offer ISA accounts.
There are an array of ISA accounts to choose from to suit different levels of access requirements. However, the problem is that most ISA accounts pay interest- whatever the paltry amount may be.
At MuslimShareTrader we’ve ploughed through what’s on offer to try to find ISA accounts that do not pay interest.
The good news is we’ve found some. The choice isn’t great, but as the saying goes, something is better than nothing. Out of the 100 or so ISA accounts we found, only six did not pay any interest. Also, most ISA accounts were only accessible via a website or app. The only branch-based ISA account paying 0% interest we found was the Melton Mowbray Building Society with branches near Leicester only.
P.S If you enjoy learning about the stock market and want to learn how to trade on the stock market, consider signing up to the 30 Day Trading Programme. The programme is free and you can learn at your own pace.
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