Capital gains tax and shares Q

cashbackproblems

hi guys


I recently opened up a share dealing account with iii and made a few trades, and reading the naked trader he advised to open up a shares ISA which i have also added to my Investment account on the site.

However i dont understand how this works, does it simply mean no capital gains tax is automatically paid on profits when i sell the shares, will shares in my normal account be taxed? Also the limit is 7k so can i only make 7k worth of trades in that account, what if i go over?

I know you have a limit for about 9k that you can earn tax free, but do you have to claim back the tax?

I dont have funds in my bank and need to transfer money from my normal acc back into bank account then into ISA acc, this takes 3 days so abit annoyed!

thanks in advance

Pumpkinface_2

If you buy shares within an ISA wrapper then you will not pay CGT on the profits and it will not be deducted at source.

The idea of an ISA is to save and you can purchase shares with a value of up to £7,200 this year, this is reduced if you also hold a cash ISA. Once you reach this limit you cannot make any more purchases and, if you sell some of the shares you cannot replace them. It is thus not really suitable for a trading account if you anticipate doing a lot of buying and selling. As soon as you have made £7,200 of purchases you will have to trade outside this account, whether or not you still hold those £7,200 of shares.

The £9k you refer to is your CGT allowance which is completely separate to the ISA. There is no limit on gains within the ISA. Outside the ISA you can make about £9k of capital gains tax free. I am not sure whether your share broker would deduct some of this at source or not, they would have to know the price you bought at, the price you sold out, your marginal tax band etc. I have no experience of this, but I would have thought you would be expected to declare this.

tradetime

Individual Capital Gains allowance for 2009 / 2010 is £10,100, this means that in your Non ISA you can if good enough, realize £10,100 in profit without any Capital Gains tax to pay. Your broker does not deduct tax at source on the proceeds from sales of shares, if the profit amounts to a figure in excess of the £10,100 allowance you have to declare it, or if your turnover (total sales) within the tax year exceeds £38,400 you have to declare it. Note both the allowance and the turnover figure encompass all capital gains made within the year, not just shares.

There are no capital gains to pay or declare in regards to the profits from the sale of shares in an ISA. You are limited to how much money you can put in a S&S ISA, currently £7,200 I think (check that figure) assuming you have not put anything in a cash ISA in the same year. You can buy and sell shares to the value of the money in your ISA as often as you want, however most ISA's are quite expensive for frequent trading both in the transactions they charge and when taking into account the limited amount of cash most people have in an ISA
Again your broker has nothing to do with tax deductions from the proceeds of sales, so within an ISA there is nothing to report or claim back.
Some info here.