There are only a few days left for me to make use of my Self Invested Pension Plan (SIPP) personal limit. So I’m creating a shortlist of top passive income stocks to buy before the tax year is up.
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Capital gains and dividend income are both tax-free, and the government also provides tax relief on contributions. It will give investors a 20% top-up for any contributions they make, while higher- and additional-rate taxpayers can claim even more tax relief.
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For this reason, I plan to make as much use of my annual allowance as I can before the 5 April deadline. I’m able to invest 100% of my annual income up to £60,000, which includes my own contributions and those of the government.
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.
2 top stocks on my radar
Of course, I don’t have to actually buy a stock, fund or any other financial instrument to claim my allowance. I only need to have parked my money in the SIPP and have it sitting there ready to invest.
But I don’t see any point in waiting. Firstly, the sooner I get my money working for me, the better. And secondly, there are plenty of brilliant bargains out there I’m hoping to buy before the market wises up and they rise in price.
Here are a couple of cheap, high-dividend shares I’m thinking of buying before the end of the week.
HSBC Holdings
I may not be able to draw down on the dividends HSBC Holdings (LSE:HSBA) offer just yet. But the income it provides can be used to buy more shares, giving me the chance to compound my earnings over time.
And the dividends City analysts expect the bank to pay in 2024 are certainly worth paying attention to. Today, its dividend yield sits at an enormous 9.9%.
Combined with its low price-to-earnings (P/E) ratio of 6.3 times, I think it’s a top value stock.
Asia-focused companies like this could face some profits turbulence as China’s economy splutters. But the long-term outlook for HSBC remains robust, with wealth levels tipped to drive demand for financial services through the roof.
The FTSE 100 bank is investing heavily to capitalise on this opportunity too. It plans to add hundreds more staff to its investment bank, for instance, it told Financial News last week.
Brickability Group
Brickability Group (LSE:BRCK) also offers a large forward dividend yield right now, at 5.3%. And, like HSBC, I think it’s in great shape to grow passive income over time.
It also looks dirt cheap from a growth perspective, trading on a P/E ratio of 6.7 times.
The housing market remains challenging in the UK which, in turn, poses risk to building materials suppliers like this. But with signs of recovery in homes demand — home sales rose 7% in the first quarter, according to Zoopla — now could be a time to invest.
I certainly expect Brickability’s sales to grow strongly in the years ahead as housebuilding activity picks up. Demand for its product will also be driven by ongoing upgrades to the UK’s ancient housing stock.
