Paying tax on investments outside an ISA

InvestInPoker

Hi Everyone,

I have maxed out the £15,000 ISA allowance for this tax year now and still have quite a bit of cash I want to invest/investments to make in some fidelity funds.

I understand I will be liable for capital gains tax on investments in these funds outside an ISA (if I gain more than £11,000 on them from what I read).

How is this usually done? Would fidelity take the tax out automatically? Or would it be up to me to fill out self assessment etc. Do any of you guys have experience of doing this before?

Thanks for any advice.

westy22

£11,000 is an annual allowance so if you dispose (sell) funds or investments in tranches over 2 tax years then the allowance would be £22,000. Most of us with investments outside of tax shelters tend to manage the sale of unwrapped investments to make sure that we use the annual allowance each and every year.

You would declare any capital gains over £11,000 each year on self-assessment or by writing to your tax office providing them with the details. Under £11,000 gains does not have to be reported unless total sales in the tax year are greater then 4 x the annual allowance i.e. £44,000 sales in a tax year.

InvestInPoker

Thank you for that reply westy22. I am going to be honest here it all seems very complicated. HMRC website says some things which I read as contradictory to what I am told by fidelity etc. I do not want to fill out self assessment and it seems like this is unavoidable. I guess I will just sit and wait till next April.

TCA

InvestInPoker wrote: »

I guess I will just sit and wait till next April.

Just to be clear, you would have to sell your investments before April and make over £11,000 profit before you'd need to declare anything. Subject to the rules westy22 highlighted for you.

CLAPTON

InvestInPoker wrote: »

Thank you for that reply westy22. I am going to be honest here it all seems very complicated. HMRC website says some things which I read as contradictory to what I am told by fidelity etc. I do not want to fill out self assessment and it seems like this is unavoidable. I guess I will just sit and wait till next April.

you do realise that the cgt is levied on the GAIN in value and only when you sell (realise the gain)


what investment were you planning to invest in that you expected to gain in value by over 11,000 by next April?

westy22

It is avoidable by managing your CGT disposals.

Say that you today invested £100,000 unwrapped; unless your investments are spectacularly successful then that £100,000 might have grown to say £110,000 by next August. Before 5 April 16 you sell your most successful investment to a value of £40,000 and a gain of £4,000 - £7,000 say. No reporting necessary and capital gain is within the annual allowance.

Reinvest that £40,000 sale in a different fund or shares or wait more than 30 days and buy-back the original investment.

Repeat the process each year.

It does get more difficult to achieve once unwrapped investments reach £150,000 or more as your average annual gain is then likely to exceed the annual allowance. I would argue though that, with a £40,000 annual pension contribution limit and a £15,000 annual ISA limit (£30,000 for a couple), you would need to have a hell of an income to have to revert to £50,000 per annum going into unwrapped investments.

CLAPTON

I have to say, if you know how to make such high capital gains then a little bit of paper work doesn't seem too onerous or pay some-one to do it for your

InvestInPoker

Thanks for all the replys. I apologise I am not very clued up on these things and I find it difficult to know who to trust with regards on what I am told. I have been given conflicting advice from other sources. I will try and explain now.

TCA wrote: »

Just to be clear, you would have to sell your investments before April and make over £11,000 profit before you'd need to declare anything. Subject to the rules westy22 highlighted for you.

Yes that is how I was hoping it would be. However I phoned fidelity this morning and asked them before asking you guys. The girl on the phone said I would be taxed at source but I would receive a certificate every year detailing stuff and I would HAVE to declare that no matter what. No getting around it. I cannot be arsed with that. This is also a bit different to what I read elsewhere. I thought I would just get everything without CGT taken off and the rest left up to me.

CLAPTON wrote: »

you do realise that the cgt is levied on the GAIN in value and only when you sell (realise the gain)


what investment were you planning to invest in that you expected to gain in value by over 11,000 by next April?

I do realise it is only levied on the gain of ourse, but I did not realise it was only levied when you sell thank you.

I do not have any group of investments where I expect to make over £11,000 by April lol. Would be nice right?

westy22 wrote: »

It is avoidable by managing your CGT disposals.

Say that you today invested £100,000 unwrapped; unless your investments are spectacularly successful then that £100,000 might have grown to say £110,000 by next August. Before 5 April 16 you sell your most successful investment to a value of £40,000 and a gain of £4,000 - £7,000 say. No reporting necessary and capital gain is within the annual allowance.

Reinvest that £40,000 sale in a different fund or shares or wait more than 30 days and buy-back the original investment.

Repeat the process each year.

This is logical and looks great. I was told by fidelity however I must report anything I do at all in this regard. I suspect she was wrong but it made me wonder to ask on here.

I have read HMRC website as well. I don't know I am a bit worried still. I think for peace of mind I would now rather wait till April haha

What about the Dividend tax as well I mean is that taken off at source? Or will I need to declare that no matter what?

InvestInPoker

CLAPTON wrote: »

I have to say, if you know how to make such high capital gains then a little bit of paper work doesn't seem too onerous or pay some-one to do it for your

I do not know how to make high capital gains, I just want to be correct and make sure I am following the law and paying the correct tax if I invest outside an ISA.

I also have no taxable income as all my money is from gambling winnings. I therefore do not have to fill out self assessment and would like to keep it that way.

CLAPTON

InvestInPoker wrote: »

Thanks for all the replys. I apologise I am not very clued up on these things and I find it difficult to know who to trust with regards on what I am told. I have been given conflicting advice from other sources. I will try and explain now.



Yes that is how I was hoping it would be. However I phoned fidelity this morning and asked them before asking you guys. The girl on the phone said I would be taxed at source but I would receive a certificate every year detailing stuff and I would HAVE to declare that no matter what. No getting around it. I cannot be arsed with that. This is also a bit different to what I read elsewhere. I thought I would just get everything without CGT taken off and the rest left up to me.



I do realise it is only levied on the gain of ourse, but I did not realise it was only levied when you sell thank you.

I do not have any group of investments where I expect to make over £11,000 by April lol. Would be nice right?



This is logical and looks great. I was told by fidelity however I must report anything I do at all in this regard. I suspect she was wrong but it made me wonder to ask on here.

I have read HMRC website as well. I don't know I am a bit worried still. I think for peace of mind I would now rather wait till April haha

What about the Dividend tax as well I mean is that taken off at source? Or will I need to declare that no matter what?

you only pay cgt on realised GAINs over 11,000 per annum: you only need to tell HMRC if the gains are over 11,000 or if you sell more that 44,000 worth of shares


dividends are notionally taxed at 10% at source: you only need to declare dividend if you're are a higher rate tax payer as there will be further tax to pay.


the person at Fidelity was probably telling you about dividends and not cgt but it depends what you asked her.

InvestInPoker

CLAPTON wrote: »

the person at Fidelity was probably telling you about dividends and not cgt but it depends what you asked her.

Thanks mate you are probably right. She said I would have to declare the tax paid so I guess that is on self assessment.