why put funds in ISA ?

Radiantsoul

Don't have to declare on a tax return, no CGT and no additional tax for higher earners.

Personally I don't love filling in forms so the tax return is a biggie.

EdGasket

A BIG advantage for basic-rate taxpayers of a S&S ISA is that you get gross dividends on Property REITS (Basically property shares like British Land that have opted to be real eastate investment trusts). This gives you 20% more dividend than holding the shares in a trading account. I know because I had the same share in both and found this out 'in practice'.

The downside of a S&S ISA as I see it is that when you sell something you either have to let the money sit there uninvested and earning no interest, take it out and lose ISA status, or reinvest it. I find therefore there is a continual psychological pressure to keep investing even though it might not be the best time; then because you want to keep your money invested, you end up buying something that is over-valued and you lose money on it. I think you need the discipline to let cash sit there for some considerable time if necessary and not just buy something for the sake of it.

ColdIron

happyhero wrote: »

I suppose someone with £100,000 may make over 11% and hit that but I would guess the majority wont manage a profit of £11,000 in a year.

I don't think you understand CGT. It's not a tax on 'profit' of over £11K per annum. You can make huge gains over as many years as you like and not be subject to CGT. It only applies when you crystallise that gain by selling some or all of your funds. You can avoid it by selling in annual chunks to keep your gain below the threshold but your circumstances may dictate that you need to sell more, or all of your holdings, and then you would be subject to it outside of an ISA. Are you hoping to make a gain of over £11K over the lifetime of your investment (not per year)? I would hope so

An ISA is a no brainer for all the other reasons mentioned above

jimjames

I started my ISA (originally a PEP) nearly 20 years ago

At the time there was no immediate benefit to me from doing so.

After 20 years of contributions and changes in tax rates it is now of huge benefit to me.

I had some capital gains outside an ISA a few year ago and was able to fully utilise my CGT allowance, if I had investments outside the ISA that wouldn't have been possible.

DiamondLil

Like jimjames I (and my husband) started saving into PEPs over 20 years ago for no other reason than the benefit of tax-free income in years to come; and am I glad that we did so.

xylophone

And (gloomy thought I know), the ISA will retain tax free status for widow/widower.

http://www.thisismoney.co.uk/money/saving/article-2859120/Isa-limit-rise-15-240-April-spouses-able-inherit-pot-tax-free-time.html

gadgetmind

Tracking your purchase price for CGT purposes is a right royal PITA. Throw in rights issues, mergers, demergers, and such like, and it gets worse. Do some buying and selling such that you need to track Section 104 holdings and you'll go mad.

Wrap as and when you can rather than building up a problem for the future. You don't have to do this at the start of the tax year, but certainly look at doing it during Feb and March.

masonic

enthusiasticsaver wrote: »

As well as not having to worry about capital gains if you are holding interest bearing bonds in a stocks and shares isa, the interest on that is tax free and if you are a higher rate taxpayer the dividend income tax is capped at 10%. No benefit for a basic rate taxpayer though.

Did you mean no benefit for a non-taxpayer? BR taxpayers receive interest distributions net of 20% income tax outside of an ISA, but can obtain gross payments or reclaim tax paid on interest distributions within an ISA.

Also, I don't think anyone mentioned that fact that it might be cheaper to hold investments such as investment trusts, ETFs and equities outside an ISA at HL, since they will attract a platform fee within it. But of course there are alternative ISAs in which a platform fee would not be charged.

EdGasket

A platform fee is not usually charged on ETFs and Investment Trusts as you pay a broker fee and spread to buy them. Platform fees are usually on unit trusts that cost nothing to buy hence they make their money with a platform fee instead (it used to be trailer fees on the fund commission).

masonic

EdGasket wrote: »

A platform fee is not usually charged on ETFs and Investment Trusts as you pay a broker fee and spread to buy them. Platform fees are usually on unit trusts that cost nothing to buy hence they make their money with a platform fee instead (it used to be trailer fees on the fund commission).

ISA:
http://www.hl.co.uk/investment-services/isa/savings-interest-rates-and-charges

Shares, investment trusts, ETFs, gilts and bonds
0.45% capped at £45 per annum

vs Unwrapped:
http://www.hl.co.uk/investment-services/fund-and-share-account/charges-and-interest-rates

Shares, investment trusts, ETFs,
gilts & bonds No charge