Investing Your Money in Ireland for Irish Residents: A How to Guide

If you are an Irish resident, it is important to make the most of your money by investing it in a way that will give you the best return. When it comes to investing your money, people often find themselves faced with a plethora of options but very little clarity on what the best options are for them, given their specific situation. Irish investors have a wide variety of investment options available to them, and there is something for everyone. Investing your money can be a daunting task but understanding the basics of investing and knowing which types of investments are best suited to your needs can help make it easier.

In this blog post, we will discuss the different types of investment available to Irish investors and the pros and cons of each one. We will also talk about Irish tax and how it applies to investments. Finally, we will introduce you to "Gross Roll Up" and explain what it is. Investing your money in Ireland can be a great way to secure your financial future!

‍

What is investment?

Before we get started, we must understand the fundamentals: So, what is investing? Investing means buying an asset (something of value) in the hope that the asset’s value will increase over time, at which point you can sell said asset and make a profit. So, naturally, investors target assets they hope will rise in value over time and/or produce an income.

‍

Investing or saving?

The value of an asset may decrease over time, unfortunately. It may be tempting to think, “Why not just keep my money in the bank?" It's important to know that the risks of investing are outweighed by the potential benefits if you're ready to invest. Any money you put away into a bank account runs the risk of accruing zero to little interest, or could end up costing you money over time through bank maintenance fees, transfer fees etc. The interest your money earns rarely exceeds inflation, meaning it doesn't give you more purchasing power over the long run. In contrast, investing is a passive income opportunity. To put it another way, let your money make money but you must be aware that there are always risks involved and the value of your investment can go down.

‍

Investment options.

A beginner investor might not want to actively manage their investments themselves. That’s where the experience of a financial advisor comes in. A financial advisor can help you understand what funds or assets suit you best based on your attitude to risk and other factors such as your return-on-investment expectations, investment budget, areas of interest etc.

There are many different types of investments that are available to Irish investors, including stocks and shares, bonds, mutual funds, and exchange-traded funds (ETFs). Investing in stocks and shares is a popular option for those looking for long-term growth potential. Investing in bonds can provide income with less risk as the investor can receive regular interest payments from the issuer. Investing in mutual funds and ETFs offer a diversified portfolio of investments, which helps to spread out your risk.

Stocks and Shares

Stocks and shares are an investment option where you purchase a share in a company, meaning that you become part owner of that company. Investing in stocks can provide long-term growth potential but also carries with it the risk of losing money if the stock price falls. Investing in stocks and shares requires research into the companies before investing and understanding

Bonds

Bonds are another type of investment that can offer regular income payments with less risk than stocks and shares. Investing in bonds means you loan money to the issuer, such as a government or company, and they pay a fixed rate of interest over a set period of time. Investing in bonds is generally considered to be a low-risk option but can offer less potential for longer-term growth.

Mutual Funds and ETFs

Mutual funds and ETFs are a type of investment that consists of multiple stocks, bonds, or other securities bundled together into one fund. Investing in mutual funds and ETFs provides investors with a diversified portfolio which helps to reduce risk and provide greater returns over the long-term. Investing in mutual funds and ETFs is a good option for those who don’t want to do their own research into individual stocks and bonds, as the fund manager will manage the investments on behalf of the investor.

As you can see, there are a wide range of options available to Irish investors. If you are thinking about investing some of your hard-earned money, get in contact with us at FitzGerald Flynn today.

‍

Capital gains tax (CGT)

Now that we've discussed investing, let's move on to Tax. The most important type of tax to be aware of when it comes to investing is Capital Gains Tax (CGT). CGT is a type of tax charged on the profits made from the sale of an asset. You only need to pay this if you make a profit when selling an asset and the amount only needs to be paid once the asset is sold. The rate at which you are taxed depends on the type of asset. In Ireland, CGT is charged at 33% for shares and other investments except for ones covered by an exemption or relief. The rate of charge will depend on your level of income, as well as any capital losses you have incurred in that year. This is quite a tricky area as rates change depending on different factors, so it is best to reach out to an experienced financial advisor for more information.

The good news is that Irish taxpayers are given a personal allowance of €1,270 before they have to pay CGT. It is also possible to offset any losses you make against the amount paid on your capital gains tax. This means that if you made a loss when investing in certain stocks, for example, then you can use this to reduce the amount of CGT you pay when selling them.

‍

Difference between CGT and gross rollup.

Finally, let’s discuss the difference between CGT and gross rollup. The Gross Roll-Up tax regime was introduced by Section 58 of the Finance Act, 2000. This type of tax regime applies specifically to investments made into funds. The basic concept behind the regime is that you don’t pay tax on any income or gains made from the fund. However, the fund in question bears the responsibility of deducting exit tax in respect of payments made to certain unit holders in that fund.

The main advantage of a gross rollup is that your investment can grow tax-free for eight years before any tax is taken off. The tax of 41% only applies to gains made. The investment provider must take the tax every eight years, or if you withdraw any funds, all gains are taken first and the tax of 41% is taken from all the gains within the withdrawal amount. Or in other words, the tax payable on any gains is only payable when you withdraw your money from the investment or a chargeable event occurs. A disadvantage of a gross rollup is that you will not be able to offset your losses against future gains in a different investment. Another disadvantage of a gross rollup is that you will not be able to claim the single person allowance for CGT. This means that if you are a single taxpayer, you will not be able to reduce your CGT bill by claiming the single person allowance.

‍

Conclusion

Investing is a great way to grow your wealth and secure your financial future. Before investing in any type of fund, it is important to understand what types of investment might best suit you and your situation, as well as understanding the tax implications associated with each investment. If you require further assistance or advice on investing, do not hesitate to contact us at FitzGerald Flynn today. We are here to help you make the most of your money!

‍