Using gross instead of net return

Many investment projections used in wealth management are shown using a gross (pre-tax) return.

However, to give an accurate picture of actual returns, they should be apportioned between the income component and the capital component, because these are taxed differently.

Consider a gross return of say 8% pa, of which half or 4% is income and 4% is capital return.

How much of the 8% does an investor get if they are on a particular marginal tax rate?

Impact on Tax on Income and Capital Returns

Considering the impact of taxation (one of life's certainties!), the net return after tax ranges between 7.1% pa and 5.3% pa. This makes a big difference for long-term projections, compared with 8% pa.

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