Your browser isn't supported
It looks like you're using an old web browser. To get the most out of the site and to ensure guides display correctly, we suggest upgrading your browser now. Download the latest:

Welcome to the MSE Forums

We're home to a fantastic community of MoneySavers but anyone can post. Please exercise caution & report spam, illegal, offensive or libellous posts/messages: click "report" or email forumteam@. Skimlinks & other affiliated links are turned on

    • Sceptic001
    • By Sceptic001 13th Oct 16, 10:47 AM
    • 1,054Posts
    • 792Thanks
    Re-organising ETF investments to maximise tax allowances
    • #1
    • 13th Oct 16, 10:47 AM
    Re-organising ETF investments to maximise tax allowances 13th Oct 16 at 10:47 AM
    I have an S&S ISA containing individual shares and ETFs (ISF and IUKD)

    In response to falling interest rates I have also recently bought bond ETFs outside the ISA (EEXF, ISFX and INXG)

    As I understand it, share-based ETFs qualify for the new £5000 dividend allowance but bond-based ETFs do not. Is this correct?

    If so, it would seem rational to "swap" my holdings.

    This will also crystalise the capital gains on the bond ETFs, using this year's CGT £11,100 allowance.

    Apart from the dealing costs and small loss on the buy/sell spread, is there any down-side to doing this?

    Thanks for any help you can offer.
    Last edited by Sceptic001; 13-10-2016 at 5:00 PM. Reason: amend title
Page 1
    • Linton
    • By Linton 13th Oct 16, 11:05 AM
    • 6,742 Posts
    • 6,309 Thanks
    • #2
    • 13th Oct 16, 11:05 AM
    • #2
    • 13th Oct 16, 11:05 AM
    I would have thought that bond based ETFs would benefit from the £1000 savings allowance. The HMRC website says that:

    interest distributions (but not dividend distributions) from authorised unit trusts, open-ended investment companies and investment trusts

    do qualify. So whether that includes ETFs could be worth checking.
    • Sceptic001
    • By Sceptic001 13th Oct 16, 5:07 PM
    • 1,054 Posts
    • 792 Thanks
    • #3
    • 13th Oct 16, 5:07 PM
    • #3
    • 13th Oct 16, 5:07 PM
    Thanks, Linton, but my savings allowance is already accounted for. I assume you are right, but a bit of googling has failed to turn up the definitive answer.

    There seems to be a lack of clear information (not advice) about the tax treatment of ETFs for investors. I have looked at this document on the ishares website which, as far as I can see, fails to answer these simple questions.
    • bowlhead99
    • By bowlhead99 13th Oct 16, 5:37 PM
    • 4,803 Posts
    • 8,435 Thanks
    • #4
    • 13th Oct 16, 5:37 PM
    • #4
    • 13th Oct 16, 5:37 PM
    There is a good argument to say you should have your interest and property income-producing assets in an ISA and a large chunk of equity funds outside the wrapper, where you can utilise the handy dividend allowance and also hopefully manage the cgt through the annual exemption (likely the equity funds will produce larger gains over the long term in normal market conditions but hopefully still manageable).

    However, the counter argument would say, I hope for 7% a year from my equity funds and only 3.5 from my nice safe bond funds. So if I have £100k or £200k ISA today, cramming it with equities will allow it to double into a £200k or £400k ISA wrapper in ten years (ignoring new annual subscriptions). However if I cram it with bonds it will take two decades to reach that size.

    Having (say) a £200k ISA wrapper is very useful for whatever income-producing assets you eventually want to hold in retirement. Whereas putting the bonds in there (particularly now with yields on the floor and very depressed growth prospects) one might not really expect this useful "wrapper" to grow at anywhere near the same pace.

    However the sums and the psychology will be different for everyone and you can add 100k to the size of your is wrapper in five years anyway simply by utilising the annual contributions allowance which will be £20kpa from next April.
Welcome to our new Forum!

Our aim is to save you money quickly and easily. We hope you like it!

Forum Team Contact us

Live Stats

182Posts Today

1,347Users online

Martin's Twitter
  • Just changed my profile description. Wish I was cool and brave enough to go for one of those really short ones!

  • Happy with my 15k time today, one of my fastest 1:18:56. Managing to keep up my 150k a month target.

  • That's why I'm asking question. To see whether people perceive they are or aren't.

  • Follow Martin