Best way to transfer AIM shares to ISA?

longwalks1

Obviously from next week, I have 2 holdings in an AIM company and would like them in my x-o ISA for this years allowance, what's the easiest way for me to transfer them into my ISA?

Thanks in advance

bowlhead99

You aren't able to put shares or other financial instruments into an ISA (whether AIM shares, FTSE shares, funds, bonds) if they are currently outside an ISA. This is not an x-o rule it's the government's rule.

All you can do is subscribe cash into the ISA (up to your annual limit of cash contributions) and then buy the shares inside the ISA, having sold them outside the ISA to raise funds.

If you have as much spare cash as the shares are worth, the 'best' thing to do if you want to do it manually with full control over the timing is potentially:

- subscribe the cash into the ISA so it is cleared and you are ready to buy.
- get confirmation from x-o that they are definitely accepting buy orders for those stocks within an ISA (their website banner says the rules will change on 5 Aug, but just because the tax rules change on 5 Aug it doesn't mean their systems will definitely be ready to trade at 8am that day having been blocking you up to the night before)
- Sell one company's shares in your normal account and buy the same number of shares in your ISA account the next minute. Or buy then immediately sell. You will be out of the market for at most a minute, or have a double exposure to that stock for a minute, depending which order you do it in. Then repeat for the next stock.
- This way you will minimise time out of the market but you will unavoidably lose the difference between buy and sell prices, and the cost of stamp duty if the companies are registered in the UK rather than for example BVI. You could always sell, hope price goes down, then buy, to try to avoid this, but it could be an expensive gamble if the price instead goes up without you.

If you don't have enough cash to pre-fund the ISA account you would need to sell and wait for the cash.

Of course, doing it manually like this gives you some control, and works with any broker, but costs you two lots of commissions for the two trades and potentially a chunk of time out of the market if you didn't have the cash up front. X-o have a deal where they will arrange the buys and sells for you commission free if you email them and have them arrange it on your behalf. It still costs you the bid-offer price spread and stamp duty if relevant, and they won't necessarily pick the time of day when the spreads are smallest (spreads can be large and quite variable on some AIM stocks). So some people with large holdings might prefer to do it manually if they can afford to pre-fund the ISA and avoid being out of the market too long, and just pay the commissions as normal.

Remember if you've used some ISA allowance already this year (or the holdings are large) you might not have enough new subscription allowance left to able to fit the entire shareholdings into your ISA by contributing the sale proceeds from outside the ISA. You might need to sell something else within your existing ISA to make funds available instead.

Hope that covers it. Most people would just let x-o do it for them as outlined in "Can I transfer shares I already own into an ISA account?", here:http://www.x-o.co.uk/isa-information.htm

westy22

If your AIM shares are in a X-O trading account then use their commission-free Bed and ISA service - no selling or buying fee involved and they do the trades within seconds of each other so there should be no loss other than SDRT where applicable.

longwalks1

Thanks guys
And is it the value of the shares transferred at the time on the day you want to move them over, or the purchase price you paid originally?

Thanks again

Thrugelmir

Worth remembering that capital losses aren't tax deductible inside an ISA. AIM investments are at a far greater risk of tanking that a Company listed on the main exchange.

longwalks1

Thrugelmir wrote: »

Worth remembering that capital losses aren't tax deductible inside an ISA. AIM investments are at a far greater risk of tanking that a Company listed on the main exchange.

Thanks Thrugelmir
So if im currently sitting on a loss with some AIM shares, if I transfer them over into my ISA I cant claim allowance on any profits I may make (if over the tax free allowance limit), but surely it doesnt matter as they're be in an ISA, so therefore no subject to tax on any profit?

Shaolin_Monkey

britishboy wrote: »

Thanks guys
And is it the value of the shares transferred at the time on the day you want to move them over, or the purchase price you paid originally?

Thanks again

It's the value on the day the shares are sold that will be transferred. As explained in the first reply, the shares are not really transferred at all. What actually happens is that the shares are sold, the proceeds are moved to the ISA as cash (this cash is a normal ISA subscription, so subject to usual annual limits) and the shares are then re-purchased within the ISA.

If on the day, say your shares were sold for £5000, that would be the amount transferred to the ISA. As the annual ISA limit is currently £11520, that would mean you could add a further £6520 to ISA's in this tax year (of which up to £5760 could go into a cash ISA).

The only relevance the original purchase price has would be for calculating your gains and losses for CGT purposes at the date of the sale. It's a normal disposal and so any gains or losses would count towards your annual CGT allowance. So losses on these shares could potentially offset gains elsewhere if you have other holdings. Once in the ISA, CGT is irrelevant.

chris_m

westy22 wrote: »

so there should be no loss other than SDRT where applicable.

And the loss caused by the difference between the bid and offer prices - which on some AIM shares can be quite large.

s79

Hi all, this may be a a bit of a no-brainer question, but assuming you have an ISA allowance to do this, it is definitely worth putting my AIM shares into an ISA right? I was getting concerned about the spread on some of my shares while letting my broker "sell shares -> buy into ISA"

I guess if the spread is less than the CGT rate of 18% (which is very unlikely) its worth doing right?

I guess it is too risky to sell, wait for a fall in price and then buy into the ISA?

Btw awesome post Bowlhead99.

p.s. i guess im basically asking should be overly concerned about losing a small-ish number of shares because of the buy-sell spread? Or am i being silly!?

grey_gym_sock

no, it's not necessarily worth it.

how likely are you to pay CGT?

do you go over annual CGT exemption every year? or are you likely to reach that point after a few years, given the total amount you're investing?

will you use your full S&S ISA allowance this year in some other way if you don't bed-and-ISA your AIM shares?

there is also the possibility of saving higher-rate tax on dividends (if you reach higher rate in the future) by putting shares in an ISA.

selling and waiting for a fall in price doesn't make much sense unless you have an opinion (which you're prepared to back with money) about the short-term share price movement.

s79

Thanks for your reply Grey Gym sock (nice nickname btw)

Touch wood, fingers crossed etc etc I could go over the 10k CGT limit and maybe (hopefully) this year, so i guess it is worth me doing it right?

What does bed-and-ISA mean exactly? Is that the process of the broker handling the selling and consequent buying of shares into the ISA?

Also i (don't think) I've used my cash ISA allowance for this tax year so can I use the full £11,520 allowance purely for the Stocks and Shares ISA?

One final question, say i want to sell my shares (that are now hypothetically in the ISA) how does it differ from a normal share dealing account? Does it work like a cash ISA, i.e. if you empty the account you lose the tax free benefits?