self-select ISA

nigel54321

I've just become aware of self-select ISA, can anyone tell me if I can use this for my existing shares, how and where do i go to set it up and what to look for for a good scheme / rules ?

JM_2

Hi,

Most Stockbrokers and many Banks and Building Societies ( some of which in turn own stockbrokers ) offer Self Select ISA service.

Also Investment Trusts companies offer ISAs


You have to compare their charges :

You normally have an administration charge : This could be monthly, Quarterly , Semi- Annual or Annual. With a minimum and Maximum in some cases.

Also you have to pay their dealing charges when you buy and sell shares. With some, these also vary according to how often you trade.

Also it is very important to compare what rate of Interest they will pay you on your cash balances while you are awaiting or deciding on what to invest in.

You can't transfer your existing shares in your name into Self Select ISA. What you have to do is a ' Put Through '. You sell your shares and buy them through your Self Select ISA.

This way you don't suffer a high spread in prices.

A market maker quotes a Buying price and a Selling Price. That is their spread. Profit.
So when your stockbroker goes to deal on your behalf he will be quoted these two prices by the Market Maker. Some shares have a very wide spread. Shares in the FtSE 100 and popular shares normally have a narrow spread. Shares in smaller companies which are not dealt a lot have a wider spread.

However if you want to sell and immediately buy the same shares then the Market Maker will narrow the spread.


There are various rules you have to follow. You can only buy certain stocks and shares. You can't trade in all the securities traded on the Stock Exchange.

Refer to Inland Revenue web site for rules.

Also remember that Self Select ISA allows you to protect your capital gains. That is you don't pay Capital Gains Tax.

Unfortunately you no longer save on tax credits from Dividends as the Chancellor Gordon Brown ( cheated us ) took away this benefit.

He also introduced a tax on interest received on your Cash.

However if you make a capital loss you can't claim the loss.

You have a limit of £7000 which you can subscribe into a Self Select ISA. ( You can't take up any other type of ISAs elsewhere beyond the £7,000 limit )

http://www.hmrc.gov.uk/budget2005/revbn02.htm

So if your existing shares are valued more than £7,000, then you can sell up to that limit only and buy them back into your ISA aaccount for a single tax year.

By the way, avoid TD Waterhouse. They have recently substantially reduced the rate of interest they pay on your cash to a mere 0.5 % pa. Whereas you can easily get over 5 % pa. on your cash deposits outside the Self Select ISA.

Unfortunately many stockbrokers are cheating the investors in this way. At one time you could easily get 1% below base rate. Now you have to make do with some crumbs !

tenby_deckchair

have sent u a PM nigel.

MiM

Hi JM2 or anyone else who understands these things as this is quite an old thread and I notice JM2 has not posted since... Anyway, I'll stop rambling.

The above scenario applies to me, I found this via a search. Could anyone give me some specific help though?

I have...

1. Around £1,600 in electronic shares with Comdirect.

2. Around £1,400 in paper shares (two).

3. A little bit of cash in a high interest account.

I would like a self-select ISA and as Comdirect charge £12.50 per trade I'm interested in Hoodless Brennan, which has low trade charges.

How easy would it be for me to consolidate these three into an equity ISA and can I have up to £7,000?

Many thanks for any pointers.

MJSW

Firstly, if you are only a basic rate taxpayer and expect to remain so over the next few years, then if I were you I would leave the shares as they are. You will usually make no at saving at all by putting the shares in an ISA (unless they would affect your Tax Credits or Age Allowance if you are a pensioner). And with those sort of share values, the CGT exemption is likely to be of little use, since you can make gains of up to £8,500 tax free each tax year anyaway.

Virtually all self select ISAs will charge you an annual management fee even if you make no transactions at all. In the case of Hoodless Brennan, this is £50 per year, which is double Comdirect's rate. In order for the £50 annual fee to make the tax savings worthwhile, you would need to be a higher rate taxpayer with dividend income of at least £200 per annum (which might just be possible with your £3000 worth of shares, but only if they are shares with very high yields). You will also incur further dealing charges when put your existing shares into the ISA, as you need to sell them and then buy them back again. With the relatively small values we are talking about here, it may be worth considering a collective investment eg unit or investment trusts, which would probably be more cost effective than putting the individual shares in a self select ISA.

And in order for the £50 annual fee and £7 dealing charge to work out better than Comdirect's £25 annual fee and £12.50 dealing charge, you would need to making at least 5 transactions every year to make it worthwhile.

By all means put the cash balances in a good Mini Cash ISA, which would save you tax whether you are a basic or higher rate taxpayer. And if you do decide you still want to put the shares into an ISA, don't forget you can put up to £4000 into a Mini Stocks & Shares ISA (which should be more than enough for your £3000 worth of shares) and up to £3000 into a Mini Cash ISA. The cash is likely to earn a much better rate of interst in a Cash ISA than it would in the Stocks and Shares ISA. In my opinion, I would only consider putting your cash into the Shares ISA if you actually intend to use it to buy more shares. If you just want to keep it as cash, then the Mini Cash ISA is the way to go in my opinion.

garichd

Hi ,

I have a question on similar lines.. I just heared about Shares ISAs and wanted to go for it. I did a little bit of searching and came to know that you can't open "Mini Cash ISA account and Shares ISA account in the same year". Now this confuses me. I already have a Mini Cash ISA account which I opened last year, in the begning of this finacial year I put some cash in the same account . does this mean I am ineligible for shares ISA account or I can still go for it as I opened the Mini cash ISA account last year..
any help will be appriciated..

Thanks,
gari..

MJSW

You are allowed contribute to both a Mini Cash ISA (up to £3000 per tax year) and a Mini Stock & Shares ISA (up to £4000 per tax year) in the same tax year.

If you have already contibuted to a cash ISA in this tax year, the only option you have lost out on is the ablity to open a maxi ISA in this tax year. Up to £7,000 can be added to Maxi ISAs each tax year (usually used for stocks/shares component), but you can't contribute to one if you have already contributed to a mini ISA in the same tax year. You can use part of the £7000 limit for a cash component (up to £3000) with the rest in stocks/shares, but most providers don't offer this facility.

So to cut a long story short, if you already have subscribed to a Mini Cash ISA this tax year, the only ISA option left to you this tax year is to put up to £4,000 in a Mini Stocks & Shares ISA.