Non-ISA investments: need to tell tax man?

jrawle

I have only ever held investments as part of a stocks and shares ISA. If this year, or in the future, I wanted to invest more than my ISA allowance, would I need to inform the tax man (or even complete a return) even though no tax was due?

I am a basic rate taxpayer and don't currently complete a tax return. I understand all the different taxes that apply, just not about reporting them. I would have no extra tax to pay on any income, and am unlikely to be making gains of more than £10,000 in any one year so no CGT. Would I need to do anything annually, and would I need to do anything in years when I disposed of investments even if no CGT was due?

bigfreddiel

jrawle wrote: »

I have only ever held investments as part of a stocks and shares ISA. If this year, or in the future, I wanted to invest more than my ISA allowance, would I need to inform the tax man (or even complete a return) even though no tax was due?

I am a basic rate taxpayer and don't currently complete a tax return. I understand all the different taxes that apply, just not about reporting them. I would have no extra tax to pay on any income, and am unlikely to be making gains of more than £10,000 in any one year so no CGT. Would I need to do anything annually, and would I need to do anything in years when I disposed of investments even if no CGT was due?

Clue is in the name - INCOME TAX -you need to report all your income above and beyond your PAYE income - simple isn't it.

So if you are not taking any income from your funds then you don't have any worries.

But you must keep records - just to be bullet proof

hope that helps

If it does don't thank me -please make a donation to the "smile train" - http://www.smiletrain.org/

cheers

fj

BLB53

You can, of course, transfer your investments into your ISA in the new tax year next April.

atush

If you are getting your interest Gross, you must file and pay tax. If you are a basic rate taxpayer and interest is paid net of tax, you don't have to worry.

But if you aren't filling your cash (or S&S) Isas each year you are wasting money on tax that you could legally avoid paying.

Biggles

jrawle wrote: »

I would have no extra tax to pay on any income, and am unlikely to be making gains of more than £10,000 in any one year so no CGT. Would I need to do anything annually, and would I need to do anything in years when I disposed of investments even if no CGT was due?

You only need to report capital gains if a) they exceed the annual tax-free allowance (£10,600 for 2011-12) or b) your total 'disposal proceeds' are more than four times the tax-free allowance (that is more than £42,400 for 2011-12).

CLAPTON

Biggles wrote: »

You only need to report capital gains if a) they exceed the annual tax-free allowance (£10,600 for 2011-12) or b) your total 'disposal proceeds' are no more than four times the tax-free allowance (that is no more than £42,400 for 2011-12).

you need to delete the word 'no' before 'more' which I'm sure you actually meant

jrawle

bigfreddiel wrote: »

Clue is in the name - INCOME TAX -you need to report all your income above and beyond your PAYE income - simple isn't it.

So if you are not taking any income from your funds then you don't have any worries.

Unfortunately it's not that simple. Income from investments (dividends, etc.) are taxable at 10% for basic rate payers, but come with a 10% tax credit, meaning there is no extra tax to pay.

As for not taking income, I don't think this is true either. If the income is accumulated, it still counts as income for tax purposes, and higher rate taxpayers would need to pay tax - which can be a nightmare to calculate if they are accumulation funds where the income isn't explicitly paid out.

BLB53 wrote: »

You can, of course, transfer your investments into your ISA in the new tax year next April.

Can I transfer them, or would I have to sell units and re-purchase them? Presumably any gains made before they were in the ISA would be subject to CGT, and while these will certainly not be anywhere near £10,000 it still returns us to my original question on reporting gains.

atush wrote: »

But if you aren't filling your cash (or S&S) Isas each year you are wasting money on tax that you could legally avoid paying.

As my original question states, I usually use my full ISA allowance, but am thinking of investing more than that this year.

Thanks for the replies so far, although they do give me the impresion that most people are just as puzzled by the tax system as me!

sorcerer

I have had income in a normal account (non ISA) and tax was taken automatically at 20% by the broker, so I think as long as your a 20% tax payer and your broker takes the tax you don't have to do much. Unless it takes you into a new tax bracket or your income is greater than £10,000 a year. (not including your job wages)

jamesd

jrawle wrote: »

Can I transfer them, or would I have to sell units and re-purchase them? Presumably any gains made before they were in the ISA would be subject to CGT, and while these will certainly not be anywhere near £10,000 it still returns us to my original question on reporting gains.

It is not permitted to just move them into the ISA, they must be sold and repurchased inside. You'll find that providers often offer a Bed and ISA option that takes care of both sides of that.

Any gains would be subject to CGT if over the allowance.

Don't sell enough to trigger CGT. If you have gains and unused CGT allowance, sell and buy something else and hold that for a month before (optionally) switching back. That'll reset the purchase price to the new higher price with the gain already made.

Avoiding the tax reporting and tracking hassle is one of the advantages of the S&S ISA.

Biggles

CLAPTON wrote: »

you need to delete the word 'no' before 'more' which I'm sure you actually meant

Oops, yes, thanks!

Ark_Welder

jrawle wrote: »

As for not taking income, I don't think this is true either. If the income is accumulated, it still counts as income for tax purposes, and higher rate taxpayers would need to pay tax - which can be a nightmare to calculate if they are accumulation funds where the income isn't explicitly paid out.

There shouldn't be any more problems with accumulation units than with income units. You should still receive either a tax voucher for each distribution when it is made, or a consolidated tax certificate just after the end of the tax year that will show the nominal income received and the associated tax credits. These two methods should be used in preference to seeing the dividend credited to your bank account (which is a presumption on my part, thinking that this is how you think you might need to track income distributions).


But, back to the question in your OP: no, you will not need to report anything to HMRC if no further tax is due from your investment income - acc or inc.

HMRC: Do you need to complete a tax return?