S/s isa

Anniel34

I have a self select S/S ISA with HL. The stocks will give me dividends. Is this dividend income tax free as the S/S are within an ISA wrapper?

Thanks for any advice.

Anniel34

Lokolo

No they are not.

If you are a higher rate tax payer you will not have to pay the higher amount, but for normal rate tax payer there is no advantage.

Anniel34

Thank you for your reply Lokolo,

If I just leave the money within the investment rather than taking the dividend, does the money remain tax free?

If not I cannot see the point of a S/S ISA?

Anniel34

Lokolo

Anniel34 wrote: »

Thank you for your reply Lokolo,

If I just leave the money within the investment rather than taking the dividend, does the money remain tax free?

If not I cannot see the point of a S/S ISA?

Anniel34

No it will not make a difference if you choose ACC or INC.

And only point really is Capital Gains, so if you are going to be making a lot of money. Or if you are a higher rate tax payer.

If these are not likely at all to happen then there isn't much point.

Although I am not going to be either, the ISA doesn't cost anything so I may as well use it anyway.

LardyCake

The income from any gilts and corporate bonds you hold directly in a s/s ISA is tax free.

Anniel34

Thank you LardyCake,

So I will now look at investing into corporate bonds with a track record and decent income?? is there such a thing?

Anniel34

Jonbvn

Anniel34 wrote: »

Thank you LardyCake,

So I will now look at investing into corporate bonds with a track record and decent income?? is there such a thing?

Yes there is!

You can buy bonds direct or you can buy bond funds (which is what I do).

Some Corp Bond Funds
http://www.h-l.co.uk/funds/Mark-Dampiers-Wealth-150?companyid=&sectorid=150&tab=security_details&x=36&y=9

& Strategic bond Funds
http://www.h-l.co.uk/funds/Mark-Dampiers-Wealth-150?companyid=&sectorid=152&tab=security_details&x=33&y=4

UK Gilt Funds:
http://www.h-l.co.uk/funds/Mark-Dampiers-Wealth-150?companyid=&sectorid=127&tab=security_details&x=19&y=9

LardyCake

Is the income from bond funds held in a s/s ISA tax free?

Lokolo

LardyCake wrote: »

Is the income from bond funds held in a s/s ISA tax free?

Yes, I forgot about that.

I can't remember the specifics as to which do and don't.

If you're a basic rate taxpayer dividends receive the same tax treatment regardless of whether they're in an ISA or not, with the 10% tax credit being applied. If you're a higher rate taxpayer though, you will have a tax advantage because you don't have to pay the additional 22.5% that would normally be due on dividends.
If, however, you buy a stocks and shares ISA where the underlying investment pays interest - such as corporate bonds - then the interest will be tax-free regardless of the tax band you fall into.