Tax on Withdrawls

Looking for an expert to explain trading 212’s tax to me.

Background: My easy access account had a rather poor 1.16% interest rate. This has been slashed to 0.01%!!! I want a relative amount of liquidity with this money as it is a savings account for a house and I’m close to being able to get one.

Thinking: One option available is to but it into a very defensive stock. For example I could put it into KO for a year or two. KO is at 3.34% dividend yield. This yield I believe is cut by US tax at 15%.

If I bought 1000 KO shares, for example, this would be 321.72 per quarter(p/q). *0.85 = 273.479 p/q. *4 = 1093.916 per year (p/y).

The savings account was circa 40 per month (p/m), which is 480 p/y. So a big trade off, for the liquid vrs the risk.

The question: My fear is if I put in 40-50k and then want to take it out in one to two years, what sort of tax implications would I be liable for? I don’t want to be putting it in as a savings account and then get burnt on tax.

For example if I’m liable for a 10% tax on removing 50k then I’m -3k over two years (if growth is stagnant).

NB: It may seem odd that I’m putting money in already without thinking of tax withdrawls, but for me this is a long-term investment strategy. I plan on doing DRIP over 20+ years and paying out smaller amounts when I retire, not circa 50k in one lump sum.

Any help will be greatly appreciated.

You will only have tax to pay on withdrawal if the KO shares have increased in value. Then some capital gains tax will be changed, but presumably you will not mind as you will have made a gain on top of the dividend yield.

What you need to consider is that the KO shares might fall in value. So to reduce risk it would be better not to put everything in KO. For example you could also put some money in a healthcare stock paying a good dividend like BMY, and a communications services stock like T or VZ. Two-three years is a short time horizon. There is potential for capital loss even with a diversified portfolio. There is also the possibility that the USD may be worth less in your home currency when you sell than it is today.

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Yeah, I was just using KO as an example for easy maths. I actually have T as a holding already too.

But that is good, so there would only be capital gains tax on any growth.

Good point on the currency too. I doubt the GBP is going to see any great movement with Brexit on top of the virus. But I will work it into my risk.

Thank you