ISA and PEP and CGT

OliveOil71

Can anyone help please?

I am looking at quite an nice profit this year from some AIM shares I have been buying over the last 3 years (so far £20k but maybe later in the year upwards of £35k).
I know a wee bit about CGT but need some help around the ISA situation.
This is what I have done so far...
I have already transferred half to my husband last year (he will have the same profit).
I opened up a self select ISA last week and transferred other shares (lloyds) into it as I understand you can't put in AIM shares into it. I sold and bought back my lloyds shares at a £10k loss with £5k remaining (as I know I can ofset this against my gains).

So my question is probably a really simple one...how does the ISA tax allowance work and how does it help with CGT??

also I have an old PEP I pay about £50 a month into, which I have just read is now a stock and shares ISA, how does this affect what I can pay into my self select ISA etc
I also have a cash ISA which I havan't subscribed to this year.

Thanks in advance

dzug1

The ISA allowance means that any gains you make on investments in the ISA are free of CGT

However you have boobed. Your self select ISA is invalid as you have put money in your PEP this year (well at least I think that's what you have said). You can only put new money in one or the other.

How you get out of this - don't know

dunstonh

You have made a mistake and set up two ISAs in the same tax year. The second one should be voided (thats the shares one as the regular would be the first). You should notify the new ISA provider of your error and get it resolved before HMRC decide to take action (which can vary from a get out of jail card warning "whoops, dont do it again" to telling the provider to void the ISA and recalculate and ensure tax is paid. Theoretically, you have also committed tax evasion but it is highly unlikely that would be pursued unless HMRC already have their eyes on you and are looking for a way to get you).

OliveOil71

OMG I didn't think it was that bad...I only found out this morning reading this board that a pep is an ISA now. I have had the pep for about 13 years and was always going to cash it in.
Does it make a differance that I took a payment holiday since Feb for a year as I am on maternity leave so not subscribed anything this tax year???
If so would I need to cash in the pep before the payment holiday is over?

Thanks

dunstonh

OMG I didn't think it was that bad

For most people it isnt. The "get out of jail free card" outcome is the most common response from HMRC.

I have had the pep for about 13 years and was always going to cash it in.

Why?

Why not use that to purchase the shares and use the funds from the shares sale in its place?

Does it make a differance that I took a payment holiday since Feb for a year as I am on maternity leave so not subscribed anything this tax year???

It makes a world of difference as it means you havent paid into two ISAs in the same tax year and therefore havent broken any rules.

noh

If you haven't made any payments to what was your PEP this tax year ie since April 5th 2010 then there is no problem with having opened a new ISA this tax year.

Instead of cashing in the old PEP/ISA why not transfer it to your new self select ISA and maintain the tax free status of the funds?

OliveOil71

Thanks guys
That's such a relief!!
The reason I hadn't yet cashed the pep in was it was starting to pick back up after loosing quite a bit last year. Also I like the life element attached as it was taken out for my last property (which I am renting out for the last year as I couldn't sell it when I was moving home). It's sitting about £9k so won't that take me over the allowance with my new ISA as it has the £5k of shares I transferred last week into it?

Confused!!

dunstonh

Also I like the life element attached as it was taken out for my last property

Is it attached or is it just running along side it but standalone?

OliveOil71

It's standalone, I meant to say it wasn't my last property but the one before my last one. I just kept it going as a sort of a savings policy, then it came in useful as renting out my last property is on interest only so mortgage provider wanted to know what my back up was.

Thanks

noh

OliveOil71 wrote: »

)............... It's sitting about £9k so won't that take me over the allowance with my new ISA as it has the £5k of shares I transferred last week into it?

Confused!!

The ISA annual allowance refers to new money subscribed in a tax year.
Funds transferrred in from previous years ISAs do not count towards that allowance.