Stocks and Shares ISA benifits???

Mr_Mumble

Grey Squirrel, you can't get a refund for tax paid on share dividends.

debbie42

All my savings accounts are registered for gross interest, but thanks anyway. I also keep reasonably detailed records, just in case!

carnet

Mr_Mumble wrote: »

Grey Squirrel, you can't get a refund for tax paid on share dividends.

Quite correct.

Dividend income from share-based investments is paid with 10 per cent tax deducted.

This could only be reclaimed up to 2004 if your investments were held in a PEP or ISA.

Non-taxpayers have been unable to reclaim tax on share dividends since April 1999.

dunstonh

tax on fixed interest funds can still be reclaimed though. If you have unwrapped unit trusts and ISAs, it is often worth putting your low risk funds from the fixed interest sector into the ISA rather than in unit trust if you are a basic rate taxpayer (and certainly if you are higher rate).

Rhino666

As a limited company director I have to fill out a self assessment return each year and anyone who derives income from benefits in kind, rental property, etc is likely to be asked to fill out a return automatically. You would also likely get an SA return if your salary exceeds the high rate tax threshold.

Other than that it is probably down to honesty. I suspect that many people have income well over the high rate tax threshold with salary, divs, interest, etc but do not pay high rate tax. You are of course supposed to put your hand up, elect to fill in an SA form each year and pay the considerable amount of extra tax.

Until HMG get a database to collate all incomes from all sources for individuals and that cannot be rocket science, a huge amount of tax will go unpaid.

ISAs and PEPS just mitigate against any possible impact of income tax and capital gains tax. Heads you win and tails you probably break even with a good return on your investment, god willing :-)

NonGeographicalMan

carnet wrote: »

There are also at least six Equity & Bond funds residing within the Cautious Managed Sector, where the managers have stated their intention to maintain at least a 51% bond weighting, and whose payments are therefore classified as interest rather than dividends and, as such, are eligible for the tax reclaim within an ISA.

Interestingly (no pun intended!), the recently launched New Star International Property Fund will also be eligible .

Could you specify the six and clarify if this means you can reclaim the tax deducted if holding them in a Self Select ISA and if this gets round the present appalling ripoff of most Self Select ISA managers paying interest rates on cash balances of between 0% and 3% overall interest.

moneylover

carnet wrote: »

There are also at least six Equity & Bond funds residing within the Cautious Managed Sector, where the managers have stated their intention to maintain at least a 51% bond weighting, and whose payments are therefore classified as interest rather than dividends and, as such, are eligible for the tax reclaim within an ISA.

Where can you see the sectors please and the funds within them?

NonGeographicalMan

moneylover wrote: »

Where can you see the sectors please and the funds within them?

www.trustnet.co.uk/ut/funds/sectors.asp

Browntrout_2

andrewrwebsteruk wrote: »

Hi
I have taken out the full £7000 Maxi ISA allowance in the form of a Fidelity Moneybuilder Fund. I am a standard rate tax payer.

My question is what benefit do I gain by opening this fund under an ISA wrapper.

My understanding is that tax will still be deducted from dividends at a rate of 10% regardless of it being an ISA.

Is this correct? Any help would be appreciated

Would I be better opening this fund without the ISA wrapper and using my ISA allowance for a cash Mini ISA? As I have other cash savings in a bank.

I've thought a bit about this recently, you should not allow tax planning to dominate your savings and investments, but definitely use them when you can.

From the HMRC website;

Tax benefits of ISAs

• No tax paid on the income you receive from your ISA savings and investments
• No tax paid on capital gains arising on your investments
• You can take your money out at any time (but some types have a notice period)
• You do not have to tell us about income and capital gains from ISA savings and investments.

So I reckon for a short or even medium term investment, there is probably no advantage for lower rate tax payer, but for the long term (pension supplement/alternative) it's unbeatable IMHO.

For example - let's take a one off £7K investment with an annual dividend income of 3.5% (not re-investested as I can't calculate that!), held for 20 years at a capital growth rate of 7% compound, and income growth of 10% compound. Grows to a capital £27,087 fund value with an annual income of £1,648.

All the previous 19 years income would not have been taxed and nor will any future years, also when sold there will be no CGT liability.

If there was a £7K payment in every year for 20 years, with an annual growth of 7% the fund value would be £334,144.

E&OE, DYOR

dunstonh

Tax benefits of ISAs

Another is that income generated from ISAs either naturally or fixed regular withdrawal does not reduce your age allowance (over 65s). So, if your retirement income is looking likely to be close to or over £20,900 in real terms, then getting money into ISAs is a way of reducing your taxable income to protect your age allowance.