share isa and tax efficiency savings

black_taxi_2

i earn 20k a year.im wanting to put £3.600 a year into an investment trust.they have an isa which involves charges(capped annual charge -.06% of investment or £30 max---withdrawls are free if you leave minimal £500)

option 2 --a regular savings scheme outwith isa but very low charges.no annual charge.

which is best

thx

dunstonh

ISA. Mainly as you will be liable to CGT if you dont wrap it in an ISA. I wouldnt take long with £3600 a year to become liable to CGT above your personal allowance.

Plus, keeping track of CGT liability on regular contributions is a bit of a nightmare when it comes to selling and rebuying to utilise your personal CGT allowance. Plus you would incur costs at that time for doing that.

And, ISAs are for life. You may only be earning 20k now but what about in years to come?

black_taxi_2

thx for quick reply--whats CGT?

is .06 a fair rate?

black_taxi_2

capital gains tax

LongTermLurker

dunstonh wrote: »

Plus, keeping track of CGT liability on regular contributions is a bit of a nightmare when it comes to selling and rebuying to utilise your personal CGT allowance.

Never a truer word was spoken - I'd built up quite a few funds outside an ISA over a number of years, all built up at £25pm per fund! This year, because I didn't intend to add to my S&S ISA, I decided to transfer some of the funds in (luckily, I "chose" a year when values had plummeted, meaning I could move more units into the ISA :T). To do this, I asked my old fund manager how much I'd paid for each fund holding and the document they sent me was like War & Peace, with every single transaction listed for over 10 years!

ISAs are well worth it, if only for being hassle-free.

0.06% AMC is dirt cheap, especially with a £30 cap - the one you're looking at must be a tracker fund (ie, no-one is actually doing anything to help improve performance / add professional knowledge and judgement). Now I know the anti-management-league will jump on me for saying someone who's spent years doing a particular job is able to add something which "following the herd" can't, but although tracker funds can follow the crowd uphill, they can also follow it over the cliff as well. It's just something to bear in mind. 1% - 1.5% AMC is a more usual figure for actively managed funds.