Transferring share assets to an ISA

4richa4pora

Hi,

I have a mini cash ISA for this tax year.

I am disposing of some shares to utilise my Capital Gains Tax allowance for this tax year.

Approx £3000 of these shares are for HBOS.

Does it make sense to put the £3000 of shares in a 'mini stocks and shares ISA' (to avoid future CGT problems) or will the annual maintenance costs outweigh the tax advantage of the ISA wrapper?

The investment would be for a long period of time.

Do you think it would be better to sell the shares and then invest the money in (say three) units trust/OEIC etc within an ISA wrapper via a discount broker?

cloud_dog

Ok, have to reply based on not knowing your full circumstances, so...............

You know that your CGT limit is £8500 this tax year? That is £8500 over and above your original investment. If you are married you can also transfer stock to your partner for them to sell in order to utilise their CGT allowance. You can also offset any losses you may have incurred during this tax year, i.e if you have sold shares this tax year you can deduct that from your total CGT liability.

Without knowing what monies the sale of your shares wil produce its difficult to advise but, you mention £3000 of HBOS, this is below the CGT limit - unless you have already accrued CGT profits this year.

Additionally for shares you have held since before 1998 (I think, need to check on the actuial date) you can claim tapering CGT relief - not sure if this is relevant?

To answer the final bit of your post, you cannot 'transfer' stocks into an ISA to avoid CGT, you must sell the investment and then re-invest within an ISA; what investment you make within the ISA (funds / stocks / shares, etc) is up to you.

cloud_dog

4richa4pora

Thanks for your reply!

1. Yes I do know that the CGT free limit after indexation, allowable expenses and taper relief is £8500 for 2005/6, and after donating some shares to my wife we are encashing shares to utilise both of our limits to near maximum.

But we both have approx £3000 of HBOS shares (within the CGT limits).

As I understand it, we could simply sell these and then:

a. spend the money

b. put the money in a savings account with no ISA wrapper eg ICICI or a RegSavingsAcct (savings fountain). We already have mini cash ISAs for the tax year.

c. invest the money via a discount broker (Cavendish or similar) in a mini shares ISA using unit trusts/OEIC. I understand the charging system for this option and have used it in the past for both MAXI and MINI-SHARES(unit trust/OEIC) ISAs. Obviously never both in the same tax year.

d. invest the money in a mini shares ISA by reinvesting in HBOS or similar. BUT, it appears that this can only be done using a stockbroker, who will obviously charge for the service.

We:

a. have no desire to spend the money so the spending option is a non starter,

b. are happy that we have sufficient emergency cash (in savings accounts available) at all times, which tends to rule out the savings route,

and we consider the money to be 'non essential' and available for speculative long term investment.

So we are now rocking between options c and d.

At first we thought that just putting the HBOS shares in an ISA wrapper and then leaving them to ferment would be the simplest and more reasonable idea. But research is now showing that this method involves quite high annual costs even when no transactions occur each year. We were quoted a minimum of £25 per annum each yesterday by one stockbroker.

Thanks to ME for putting fingers to keyboard and therefore organising/clarifying my mind, and YOU for replying so clearly to my query I suspect that we will go down the familiar Mini Share ISA route via a discount broker, and broaden our investment spread by investing in (maybe) a combined total of six different OEICs within a 'Funds Supermarket' type ISA umbrella.

I welcome any thoughts that might arise - and thanks again!

cloud_dog

Re a mini stocks/shares ISA costs, I think £25pa charges is probably the lowest you will find. I have a trading account with Sqauregain (formerly Comdirect) and their stocks/shares ISA account has a £25 annual charge.

I'm sure you are aware but, the only reason (nowadays) of holding stocks (investments) within ISA wrappers is to protect yourself from CGT liabilities in the future (as divi's are no longer tax exempt).

I think the question you need to consider is what possible CGT might you face in the future? Again, depending on the size of your investments it may find it worthhile to deposit your investments within a stocks/sjares ISA.

I am gradually moving my investments from normal trading accounts into stocks/shares ISA, and will do this in mine and my wife's accounts. When you consider that £25 is only 0.35% on a £7k investment is does not seem unreasonable, and if you continue to transfer / deposit money / investments into the ISA this percentage will reduce. I'm sure your investments will produce more divis pa than the cost of £25.

My opinion (for what its worth), if you are likely to continue to invest / hold shares then I think it is worth considering stock/shares ISA for the longer term. The point at which you identify this to be prudent will be down to your circumstances.

cloud_dog