Cash vs. Stocks & Shares ISA

Lokolo

As above no they don't. Its one of the reasons why people move away from TD Waterhouse. B*stards.

Theres also these guys:

http://www.x-o.co.uk/

New to the market but my friends used them and found them pretty good. UK only shares.

Rollinghome

I'm not sure why anyone with any financial nous would transfer all their cash ISA to a S&S ISA before they get any tax benefit from doing that? If you wouldn't save CGT or income tax on investments within an ISA then it seems logical to keep the maximum as a cash ISA where it will save tax for as long as possible.

The Chancellor loves people who transfer their cash ISAs to S&S ISAs and save him all that tax relief - which is why he won't let them transfer back it the other way.

Personally I use my maximum cash and S&S ISA allowances and did the same with TESSAs, PEPs, and Single Company PEPs before that: now converted to ISAs. I hold investments that pay little or no dividends outside an ISA, both for myself and my wife, to use our CGT allowances. A couple should be able to hold £250K or more outside an ISA without being bothered by CGT or additional income tax.

Unless someone wanted to be permanently out of cash regardless of markets I'd be interested in the logic for not making use of cash ISAs for as long as possible when savings and investments are still fairly modest.



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LionKing

I definately dont have £250k...would like too :-)

Am i better off holding my stocks and shares outside my ISA then? My equity shares is unlikely to grow over £10k in profit so wont hit CGT limit....or am i missing other benefits of using ISA wrapper for S&S

Jonbvn

Rollinghome wrote: »

A couple should be able to hold £250K or more outside an ISA without being bothered by CGT or additional income tax.

Some of our holdings increased massively over the last year. The amount we hold is less than £250k, but the gains would have easily exceeded the CGT limit if held outside an ISA.

We also hold a significant amount of bonds in our ISA's, which have outperformed cash ISA's significantly. You will be aware that the income from bonds is 100% tax-free in an ISA.

Rollinghome

Jonbvn wrote: »

Some of our holdings increased massively over the last year. The amount we hold is less than £250k, but the gains would have easily exceeded the CGT limit if held outside an ISA.

We also hold a significant amount of bonds in our ISA's, which have outperformed cash ISA's significantly. You will be aware that the income from bonds is 100% tax-free in an ISA.

Yes of course it exceeded your allowance this year but don't assume it will every year. If it averages out to more than 7% or so over the years you'll be very, very lucky. You can take £10K of tax free profits every year, you certainly don't have to take them in a single year. It's not the paper gains in a single year you are taxed on.

Yes, bonds have outperformed cash this year, which is why I stuffed my ISA with them. But don't assume you won't make a capital loss on bonds next year at the first hint of a rise in interest rates. Worth remembering too that you won't be able to set losses against gains in an ISA.

Rollinghome

LionKing wrote: »

I definately dont have £250k...would like too :-)

Am i better off holding my stocks and shares outside my ISA then? My equity shares is unlikely to grow over £10k in profit so wont hit CGT limit....or am i missing other benefits of using ISA wrapper for S&S

It depends on your circumstances. If you can hold your stocks in an ISA at no cost then there's no reason not to do that. You need to consider what benefits you'll get from the two options.

Lokolo

Rollinghome wrote: »

It depends on your circumstances. If you can hold your stocks in an ISA at no cost then there's no reason not to do that. You need to consider what benefits you'll get from the two options.

Ha I was just replying to your above post saying if its free, why not. Beat me to it

Only a few providers charge for ISAs nowadays, not sure why they even bother.

Jonbvn

Rollinghome wrote: »

Yes of course it exceeded your allowance this year but don't assume it will every year. If it averages out to more than 7% or so over the years you'll be very, very lucky. You can take £10K of tax free profits every year, you certainly don't have to take them in a single year. It's not the paper gains in a single year you are taxed on.

Yes, bonds have outperformed cash this year, which is why I stuffed my ISA with them. But don't assume you won't make a capital loss on bonds next year at the first hint of a rise in interest rates. Worth remembering too that you won't be able to set losses against gains in an ISA.

Noted. TBH, we hold some cash ISA's. However, in order to be tax-efficient as possible we have decided to max out our S&S ISA's and put any spare cash into index linked saving certs.

ses6jwg

Diversification is the key.

Cash is much more liquid than stocks and shares should you need it.

I always max my cash FIRST then any extra goes to S&S

This will be the first year where none of the cash I have in savings will be taxed.