What's the point of S&S ISA? ....

anselld

... My OH has built up over the years stocks & shares ISA containing various funds.

She is a standard rate tax payer and unlikely ever to be higher. So what is the benefit of ISA? OK, no capital gains, but it isnt a big enough pot for this to be an issue.

Is there any other benefit ?

Lokolo

Nope........

Trying_to_be_good

My S&S ISA allowed me to make a significant (well, about £5k, significant to me) capital loss that cannot be set off against anything else, as it was in an ISA wrapper!

I decided to cut my losses and set it against the mortgage (and recognise I'm quite risk-averse, for future investments!).

Aegis

If she keeps investing and builds up a big enough pot, the exemption from capital gains might become an issue. If she ever makes other large gains in a year (selling a second property, for example), then she doesn't need to worry about fund switches being taxed. If she ever becomes a higher rate taxpayer, no worry about increased dividend payments. if she ever needs to claim state benefits, some of them aren't affected by savings or investments held in an ISA.

All in all it's worth doing if you don't get charged for the privilege.

jon3001

Trying_to_be_good wrote: »

My S&S ISA allowed me to make a significant (well, about £5k, significant to me) capital loss that cannot be set off against anything else, as it was in an ISA wrapper!

So you bought high and sold low? Did you need to sell or could you have waited for a recovery? Getting cold feet in a depressed market is usually a mistake.

Out of interest - where have you been making gains to offset the loss? Nearly everything has taken a hit recently.

Trying_to_be_good wrote: »

I decided to cut my losses and set it against the mortgage

With interest rates at record lows is this the best use of your capital?

Trying_to_be_good wrote: »

(and recognise I'm quite risk-averse, for future investments!).

A lesson for us all: understand the risks before investing.

jon3001

anselld wrote: »

Is there any other benefit ?

No tax to pay on interest received from corporate bonds or distribution funds.

In many cases the ISA wrapper is free so you might as well have it.

dunstonh

No reduction on age allowance
No capital gains tax
ability to reclaim tax on interest where the investment contains fixed interest securities
no liability for higher rate tax.
no requirement to keep records of buys/sells to comply with tax requirements
no requirement to put the tax on distributions/dividends on your tax return.

anselld

Aegis wrote: »

If she ever makes other large gains in a year (selling a second property, for example), then she doesn't need to worry about fund switches being taxed.

Conversely, if such a capital gain is made there is no ability to crystalise any losses on shares within the ISA and offset them against the gain.

Edit: Sorry, I missed the previous post by TryingToBeGood which is effectively the same comment!

Trying_to_be_good

jon3001 wrote: »

So you bought high and sold low? Did you need to sell or could you have waited for a recovery? Getting cold feet in a depressed market is usually a mistake.

Out of interest - where have you been making gains to offset the loss? Nearly everything has taken a hit recently.



With interest rates at record lows is this the best use of your capital?



A lesson for us all: understand the risks before investing.

I bought in the 1990s as a long-term investment, when I had a much higher risk profile understanding investments go down as well as up. That has changed over time, particularly with an 'instant' step-family, and I'm about to buy a much larger (and more expensive) house, and my mortgage rate will be getting on for 5% (but fixed for 5-years, given my risk profile, and with an offset function). I also cashed in my under-performing endowment, just before the recent slump.

It would be useful to be able to carry forward a captial loss to set against potential future gains (for example, should I be lucky enough to afford a second property, which subsequently sold for a profit).

I'll continue to save in cash ISAs, but am unlikely to return to the world of equity ISAs, because my I'm now much more risk-averse with my money. I'll be focusing on repaying a large mortgage instead.