I don't have one/any, but simplistically, I believe you can invest in one each tax year, which allows the fund to grow under a tax free umbrella.
In a managed fund, you pay commission whether the fund increases or decreases in value. Or you can pick & choose your own equities (primarily shares I think) and pay an annual flat fee to the provider of that fund, plus your own individual buying/selling commissions. Normally done online.
If you are allowed to earn ££, whatever it currently is, pa in 'unearned income' without paying tax, in a stocks & shares account with a broker, again dealing online, picking & choosing your own shares, are there any advantages in having an Isa? The only obvious one that occurs to me is if you get lucky and one of your stocks increases hugely in value, then you may end up paying tax once you exceed the unearned income limit.
Sorry for the rambling nature of the post, but I am thinking of opening my own online dealing account with a broker outside the Isa thing. And making my own judgements on what equities I hold in the account. A bit of fun also.
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SFAIK there is no tax payable on any income or profit derived from any ISA, that is what they are about! Some years ago I had a cash ISA which was tied to the Halifax house price index. I made 50% on that in 18 months and there was no tax to pay.
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I would sign up for, and run a dummy (tho using real live data) share trading account for a while to see how you would do.
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If you are saying is there an advantage in investing via an ISA if you would not actually be liable to tax anyway the answer is no
The whole point of a shares iSA is that the income and capital gains are tax free. If you are not eligible to pay tax then there is no benefit. Your total ncome would have to be pretty low to not make you liable for income tax and if it is that low it is debatable whether you should be investing in shares.
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There's no 'allowance' as such for unearned income. Everyone who earns under £100k has a personal allowance for income tax purposes, and there's an annual capital gains tax (CGT) allowance of £10,900 (for the current tax year). The CGT allowance can't be rolled over from one year to the next, so while in the early years there might seem to be little point in the ISA wrapper, as your portfolio grows it becomes more important. To make life more difficult its become progressively harder to 'bed and breakfast' shares to crystalise a gain to use your CGT allowance.
Likewise your unused ISA allowance can't be carried forward either. Investing in shares generally means at some point you'll receive some dividend income - outside an ISA wrapper these will be taxed; inside they are not, but you can (irrevocably) withdraw cash from an ISA completely tax free. Z's idea of 'playing' first is a very good one - we all remember the great shares we invested in. Apple anyone? But we tend to gloss over the Nokias of the world ;-)
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I remember the mistake I made.It's easy to buy shares, selling them at the right time is the one.
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Hmmm so can I make my own ISA wrapper and put my own company shares into it?
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Or just spread bet. No tax to pay
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>> Hmmm so can I make my own ISA wrapper and put my own company shares
>> into it?
>>
Only if they're quoted on a recognised stock exchange (excluding AIM) and you have a self select ISA:
"Within a stocks and shares ISA it is possible to hold any shares listed on a recognised stock exchange anywhere in the world, government and corporate bonds, unit trusts, open ended investment companies (OEICS) and investment trusts, but not unquoted shares, shares listed on the alternative investment market, options or futures. However, many ISA providers only offer a limited choice of investment funds - often just the funds managed by the provider itself. To have access to the full range of qualifying investments it will probably be necessary to have a self select ISA with a stockbroker, and even then the choice may be restricted, for example, to just FTSE 350 companies."
Quote from the ACCA website, and unverifed by me on the HMRC website; I've no reason to doubt it though!!
Last edited by: PeterS on Wed 28 Aug 13 at 21:19
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>> Hmmm so can I make my own ISA wrapper and put my own company shares
>> into it?
Hmmm, so you rely on your company, who sole asset is you, hoping it will prosper when you (the sole asset) can not work?
Eggs one your basket in all.
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Nah just looking for a tax dodge :-)
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Seconded (thirded?) for the dummy run idea. You might find, as I did, that you're bleedin' useless at it.
I set a dummy one up. They give you 10k play money.
I read the books, invested, lost 10k. Hmm. Reset it, read some more, lost 10k. Hmmm. Reset it, did silly things instead that were more fun. Lost 10k. Went back to basics, studied. Really tried hard, lost 10k.
Thank goodness it wasn't for real, as when it comes to picking investments I'm the opposite of King Midas. Everything I touch turns to sh...
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Then maybe you should invest in United Utilities.
They do the reverse
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>>They give you 10k play money.
Which service is that, Crankcase?
www.iii.co.uk/ will let you run three portfolios for free (e.g. for ISA, non-Isa and potential buys) and there is no nominal cash limit. It has many additional services, such as graphing over various time periods.
It is possible to trade on the site for, I believe, £10 per deal only, buying or selling. Deals are "execution only", meaning there is no advice, so the service is for savvy investors.
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It was with iii, some years ago, admittedly, running their "demo account". I don't know if they still do it, but they do still send me emails every so often about my "portfolio" and no amount of unsubscribing gets rid of them.
The site was pretty slick, yes. I expect it's even better now.
You may be delighted to hear I also had a go with a different game, using the www.capitalspreads.com website, where they also allow(ed?) a 10k demo to effectively gamble with.
Lost even more money on that one, mostly by picking exotic currencies of various flavours.
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Dividend income inside an ISA is not tax free. The tax is not reclaimable.
Only capital gains is tax-free in a S&S ISA.
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"Dividend income inside an ISA is not tax free. The tax is not reclaimable.
Only capital gains is tax-free in a S&S ISA"
Not true.
"You pay no tax on any of the income you receive from your ISA savings and investments. This includes dividends, interest and bonuses.
You pay no tax on capital gains arising on your ISA investments (losses on ISA investments cannot be allowed for Capital Gains Tax purposes against capital gains outside your ISA)."
Per HM revenue and Customs
www.hmrc.gov.uk/isa/faqs.htm#10
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Why should you pay tax on any savings in the first place? We are taxed enough all our lives.I still pay tax on a small company pension robbing gets.
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>> Dividend income inside an ISA is not tax free. The tax is not reclaimable.
>> Only capital gains is tax-free in a S&S ISA.
>>
>>
>>
The income is tax free, you just can't reclaim tax deducted at source I don't think :-). Which i think means there's no benefit for basic rate taxpayers, but higher rate tax payers don't have to pay the difference between basic rate and 40% or 45% ??
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>> >> Dividend income inside an ISA is not tax free. The tax is not reclaimable.
>> >> Only capital gains is tax-free in a S&S ISA.
>> >>
>> >>
>> >>
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>> The income is tax free, you just can't reclaim tax deducted at source I don't
>> think :-).
Exactly. The HMRC advice is disengenuous. The dividends are taxed, and you can't reclaim it.
My salary is tax-free - it's just that HMRC pinch the money before I see it :)
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Exactly. The HMRC advice is disengenuous. The dividends are taxed, and you can't reclaim it."
Yes you are correct as far as you can't reclaim the Dividend tax of 10% deducted at source but you are not liable for income tax on the income from the ISA. Any tax payer, either at the basic or higher rate will benefit from an ISA.
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Still wrong. There is no tax deducted at source on dividends. There is a notional tax credit at a rate of 10%. Tax for a basic rate taxpayer is 10%, which is covered by the tax credit - so no more tax to pay, in or out of an ISA.
Higher rate tax on divis is 32.5%, of which 10% is covered by the tax credit, so 22.5% is payable calculated on the sum of the amount paid and the tax credit.
E&OE.
Worth using your ISA allowance though, as you won't have to bother with records for CGT, or pay it.
If you want to use funds, set one up with a funds supermarket. I use Hargreaves Lansdown but there are others that might be cheaper depending on what you want to do and the amounts involved. Cavendish is another to look at.
The landscape is changing, as commissions are being replaced by fees.
I suggest looking at the moneysavingexpert Savings & Investment forum, and maybe posting your question s there.
Last edited by: Manatee on Fri 30 Aug 13 at 17:12
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Something I just read on the view that stocks and shares ISAs are unnecessary for standard rate tax payers -
goo.gl/NKwzg1
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Stocks & Shares Isa. - Meldrew
