ISA Fees question - hold cash?

bertpalmer

Hi folks

S&S ISA query - H&L recommends I keep £40 in cash in my ISA - presumably for fees.

Just wondering, is it better to hold cash to pay fees, or just have them deducted from units held as and when needed?

Does it matter?

Thanks in advance!

Vortigern

Better to hold some cash, otherwise they will charge you £1.50 to sell some units to cover the fees.

bertpalmer

Ah - thank you! )

guymo

I get very irritated by this arrangement, partly because it means that you cannot use your whole ISA allowance, and especially because it is against the rules: http://www.hmrc.gov.uk/isa/faqs.htm#25 states

Cash may only be held in a stocks and shares ISA to invest in qualifying investments (see What can stocks and shares ISAs include?). This includes cash subscriptions, interest and dividends, and proceeds from disposals of qualifying investments that have not yet been reinvested.

So you're actually not allowed to hold cash in your ISA for the purpose of paying fees. You'd think the platforms would know this and make a better arrangement e.g. a non-ISA cash account for payment of fees.

grey_gym_sock

i think you're interpreting the ISA rules far too strictly. it's only larger amounts of cash that can have an issue - i'm sure HMRC don't care about a few pounds, or about anything less than perhaps 5% or 10% of the value of the ISA being in cash.

also, this rule will be removed on 1 july.

in the case of HL, you can maximize your ISA allowance by leaving 0 cash in your ISA, and enough cash to cover the ISA fees in your fund & share account. they will initially take ISA fees from the ISA (which is not helpful for everybody, i agree), but if it contains no cash at all, they will next look for cash in the fund & share account; only if that fails do they start selling investments in the ISA.

hornmeister

I've arranged with Hargreaves for my S&S ISA charges to be taken out of a Vantage fund & share account. Make sure it's got enough to cover the ISA charges in and only invested in cash so it doesn't rack up it's own charges and your ISA allowance is not compromised.