Benefits of a stock ISA ??

kph100

Can someone please help me with the benefit of a stocks and shares ISA ?

If capital gains allowance is circa £9k per year, then investing max 7200 per year is unlikely to increase by £9k

If after paying in £7200 for 5 years = £36000 then say went up by 50% !! then gain would be £18k, but wouldnt this be spread over 5 years , meaning still under £9k limit ?

Ian

Milarky

Yes, the existence of the generous annual personal allowance for capital gains undercuts the logic of investment ISAs. There will be circumstances where the annual allowance is 'tied up' - but more often not.

I recall reading that allowance was introduced as an after thought - a mere £50 - to the original GCT in 1965. That was meant to save the Revenue 'work' apparently so that everyone that sold a item (say an antique) did not end up having to make a declaration. This is an example of the 'unintended consequences' of course - the 'disregard' was increased or indexed down the years. People got into the habit of considering it 'an entitlement'. It's now £9,000 and a lot of tax plannning activity is built around it. In an ideal world the allowance would go at the same time as rates were cut (revenue netual) But it ain't going to happen...

Back to ISAs. Here it has gone the other way - the benefit used to include tax credits on dividends as well as tax exempt gains. If, at the same time CGT had been changed to make the value of the exemption greater (by doing away with the allowance) the logic of investment ISAs would have increased.

RayWolfe

kph100 wrote: »

If after paying in £7200 for 5 years = £36000 then say went up by 50% !! then gain would be £18k, but wouldnt this be spread over 5 years , meaning still under £9k limit ?

No. The gain is calculated at the time of the sale and is the difference between the buying and selling price.