Stocks and Shares ISA Questions

sidthekid

Hi,
I have a stocks and shares ISA with the maximum allowed invested from last tax year (2012/2013). My questions are these.

1) If I re-invest the dividends do they become part of the tax free? ie I have 1000 shares in my ISA will it now become 1100 shares in my ISA when dividends reinvested or will it be 1000 shares in the ISA and say 100 shares outside the ISA?

2) If my shares go up to say £15000 (would be nice) and I sell them is that £15000 still in the 2012 ISA tax year and so buy more shares up to £15000 and then invest into another ISA for 2013 tax year?

All answers are very much appreciated if anybody can understand what I just wrote.

Shaolin_Monkey

Any dividends or profits from those investments will remain in the ISA. So yes you can re-invest the dividends within the ISA and yes if you sell the shares at a profit you can re-invest the proceeds in something else within the ISA.

The only real limit is how much "new money" you can pay into an ISA each year. Profits or dividends are not "new money".

waiax73

Shaolin_Monkey wrote: »

Any dividends or profits from those investments will remain in the ISA. So yes you can re-invest the dividends within the ISA and yes if you sell the shares at a profit you can re-invest the proceeds in something else within the ISA.

The only real limit is how much "new money" you can pay into an ISA each year. Profits or dividends are not "new money".

Just to clarify on that one there - if the dividends are being transferred into a cash account, you can't transfer it back manually to your previous year ISA. The only option is to notify your provider that you would like retain(or reinvest if you like) the income in the fund. Then it doesn't affect your ISA allowance.

Similar on question no 2 - if you sell a fund held within an ISA, you move your money out of it, which means that you lose your ISA allowance and it becomes taxable, but I think that all UK providers support 'switches' - instruction to sell one fund and buy another (all within your ISA). FYI, some providers charge a fee for doing this (e.g. Cofunds - 0.25p.c./switch.