do you need ISA investing small sums?

black_taxi_2

regular investing into a investment trust--£100 a month
cash

---

£100 a month
sharebuilder(regular buying shares monthly)£100 a month

thx

Lokolo

You don't need an ISA to invest anything but you will be tax benefits by putting it in an ISA

black_taxi_2

yeah but sharebuilder ISA costs £10 every share i buy--outwith an ISA its £1.50

jon3001

black_taxi wrote: »

yeah but sharebuilder ISA costs £10 every share i buy--outwith an ISA its £1.50

When you're dealing in individual securities (e.g. single shares, ETFs) then you do need to watch your dealing costs. A £10 fee to buy £100 of stock isn't cost effective.

There are other ways of getting stock market exposure e.g. Investment Trusts (which you mentioned - possibly cost-effective from the investment company) and Unit Trusts/OEICS (from a discount broker).

black_taxi_2

thx jon---but halifaxsharebuilder do it for £1.50

http://www.halifax.co.uk/sharedealing/products/halifax_sharebuilder.asp

how will i be affected by tax if i dont hav an isa

jon3001

black_taxi wrote: »

thx jon---but halifaxsharebuilder do it for £1.50

http://www.halifax.co.uk/sharedealing/products/halifax_sharebuilder.asp

how will i be affected by tax if i dont hav an isa

If the investments outside tax-free wrappers have net profits upon sale greater than the CGT allowance (£9600 for 2008/09) then you'll be liable for tax on those profits.

If you pay higher rate tax then you'd also be liable for some tax on any dividends.

dunstonh

Regulars are perfect for an ISA. Just think about 10-15 years down the road when you have to record your capital gains tax position. It would be a nightmare on a regular not in an ISA.

black_taxi_2

duns are u saying save up--say 3k then buy share and put in isa --to avoid costs

jon3001

dunstonh wrote: »

Regulars are perfect for an ISA. Just think about 10-15 years down the road when you have to record your capital gains tax position. It would be a nightmare on a regular not in an ISA.

Most of my investments are tax-sheltered. I think it's possible to sidestep CGT by periodically swapping investments to realise a gain. E.g. Sell an L&G Tracker to buy a HSBC Tracker.

If you're fastidious about keeping your accounts up-to-date (i.e. recording your purchases every month) then I think tools like MS Money might help out here too.

earlgrey_3

S&S ISAs are a great marketing tool for IFAs but people investing small amounts should look at the costs and inflexibilty carefully and not assume they must gain as they will from a cash ISA.

Someone paying basic rate tax will pay the same amount on share dividends whether inside or outside of an ISA. It is no longer reclaimable as it was under PEPs. For any capital gains, everyone has a capital gains allowance of £9600 every year outside of an ISA. Bear in mind that anyone who invested say £100,000 in the FTSE 10 years ago will have had a total capital gain of zilch - they will in fact have suffered a loss of over 20%.

Another problem is the lack of flexibility. Outside of an ISA you can move to cash whenever you want and get the best rate you can on the money in a bank or BS. Inside an ISA you will only get whatever the fund manager decides to offer which is usually just a token interest rate and even that is still taxed at 20%. The effect of that this year has been that many people stayed fully invested within their ISAs rather than move to cash and as a result may have lost 30% or more of their investment.

So you need to do your own sums. There might be advantages for you... or not. For many the benefits could be marginal or non existent.

dunstonh

Fixed interest funds can claim the tax back inside an ISA. Not outside (unless you are a non rate taxpayer. Use of an ISA doesnt normally cost a penny. So, there is little point in not using it.

Many S&S ISAs offer a cash facility and are just as flexible if not more. For example, outside of an ISA you may have to wait for certain dealing days to buy and sell but inside an ISA you dont have to (depends on asset). Also, charges can sometimes be less in an ISA than outside.