tax implications of stocks/shares

dolly74_2

I have just set up a sharebuilder account with Halifax where you buy shares every month in companies you want to invest in on set days of the month for £1.50 commission. I am only putting £30 a month in this at the moment. I want to increase it to £50 in April. but still, its small amounts I am talking about. Also, if you want you can purchase other shares as a one off for a higher fee. What are the tax implications? I know ISAs are tax free but didnt want an ISA as I wanted to choose the shares myself, thats why I chose the sharebuilder. What exactly do I have to tell the tax people? Is it just dividends that i tell them about or just if I sell something and make a profit? Do I send them something yearly/monthly? Please advise.

BigJonnyB

You can still choose the individual shares you want in an ISA - you need to look for a 'self select' ISA. Interactive Investor (iii.co.uk) offer a self select ISA with no charges, and use the halifax sharebuilder. They are offering free trades (rather than £1.50) until June, so are a better option than going with halifax themselves.

Within an ISA you'll have no need to declare anything, and any growth is tax-free. Dividends are still taxed at 10%, but you don't need to do anything as it is all done for you (no need to put it on your tax return).

dunstonh

I know ISAs are tax free but didnt want an ISA as I wanted to choose the shares myself

An ISA doesnt stop you doing that. There are plenty of ISAs out there that allow you to buy direct assets.

What exactly do I have to tell the tax people?

You have to work out your capital gains tax and income tax. It will be a long time before you do on £30-£50 with respect to CGT but you will need to keep a record of each purchase (amounts, dates and costs) to allow you to work out your gains. Income tax will apply if you are a higher rate taxpayer or the dividends take you into higher rate. Then you will have to declare it to HMRC.

In an ISA, you dont have to do any of that.

Rollinghome

dolly74 wrote: »

I have just set up a sharebuilder account with Halifax where you buy shares every month in companies you want to invest in on set days of the month for £1.50 commission. I am only putting £30 a month in this at the moment. I want to increase it to £50 in April. but still, its small amounts I am talking about. Also, if you want you can purchase other shares as a one off for a higher fee. What are the tax implications? I know ISAs are tax free but didnt want an ISA as I wanted to choose the shares myself, thats why I chose the sharebuilder. What exactly do I have to tell the tax people? Is it just dividends that i tell them about or just if I sell something and make a profit? Do I send them something yearly/monthly? Please advise.

If you're a standard rate tax payer then you won't save iny income tax by having your shares in an ISA. You don't have to tell the taxman unless your capital gains are over £10,100 a year.

A more important issue is your costs. If you are paying £1.50 to buy £30 worth of shares that's costing you 5% of any profit and on top to will have to pay for the spread charged by the market-maker plus stamp-duty. You'll have further costs of £10 or more to sell. Making a profit when you have all those costs will be difficult. It will also be a long time before you have a balanced portfolio of shares.

So you might be better considering another strategy possibly with some sort of collective investment or cash then moving to direct holding when you have a decent pot. That could be unit trusts or could be investment trusts, in which you become a voting shareholder, and which can have far lower costs than for unit trusts.