Foreign shares within an ISA

Sam_J12

I am thinking of purchasing a stock listed on the NYSE, and would like to do this within a S&S ISA (probably next tax year). As far as I understand, international shares are eligible to be held with an ISA, but an ISA must be held in sterling. This means that whatever platform I use will charge a currency conversion fee, or other charge, on top of any dealing fees. The amount I plan to invest on the NYSE will probably be around £3000-£5000, although I am likely to purchase other UK based ETFs or mutual funds within the same ISA up to a total value of around £10,000 over the tax year. Can anyone provide advice on the cheapest way of doing this?

Also, my rational on including this investment in an ISA is to avoid capital gains tax when I come to sell - I plan to hold the stock for at least 10 years, probably longer. The company is unlikely to pay any dividend at all in this time, so I do not need to worry about US taxes on dividends. Is this thinking rational?

IronWolf

I hold lots of foreign shares, there are two things to look out for, first is the charge for buying foreign shares, second is the FX charges. I remember TD Waterhouse had very large FX charges when I looked into it.

Quite a few brokers do NYSE like iii and Halifax, I use SaxoBank as they have a much wider range of international markets and the fees are reasonable.

george4064

I have been thinking similar questions;


I am looking to buy a dividend stock on the Stockholm exchange within my ISA held with HL.


I've managed to gather the below information for dealing in/holding foreign shares in an HL ISA from their website;

- 'The foreign exchange rate used will be based on the prevailing interbank exchange rate to which an additional spread of up to 1.5% will be added'


- 'Dividends paid in a currency other than Sterling will be converted, either by Hargreaves Lansdown or by CREST, into Sterling in order to be paid to your account. For conversions undertaken by Hargreaves Lansdown the rate used will be up to 1.7% away from the interbank rate.'


- dealing charge £11.95 (standard internet rate)



I am not sure if the above is expensive or not, it seems expensive to me but I'd rather not switch ISA provider just to hold foreign shares.


I wanted to clarify, for dividend re-investment, I take that when a dividend is received there will be a 1.7% charge on converting SEK to GBP so its paid into my HL ISA. Then, when the money is re-invested, I incur a 1.5% charge on the FX rate when converting from GBP to SEK to buy more shares...


It would be great if anyone could confirm the above, or share any additional experiences...


Thanks

grey_gym_sock

yes, in an ISA, you will pay FX charges both when you're paid a non-sterling dividend, and again when you reinvest the cash in a share quoted in another currency.

most providers charge at least 1% for FX, and it can be as high as about 2%.

IG charge only 0.3% for FX. though if you don't deal for 2 years, then they start charging you an inactivity fee of £12 per month.

idealing charge 0.5% for FX. and £5 per quarter for an ISA.

saxo charge 0.5% for FX. but have a minimum ISA balance of £50k, and an annual charge of £42.

ajbell youinvest charges 1% FX for trades, though only 0.5% for converting dividends back to sterling.

Sam_J12

Thanks for all the replies. It seems like there is no perfect platform for doing this. I suppose 1% makes little difference when I plan to hold for 10+ years!

I've been thinking a little more and perhaps there is no real advantage to buying within an ISA, given the £11k annual capital gains allowance.. Anyone have experience doing this?

kidmugsy

Sam_J12 wrote: »

I am thinking of purchasing a stock listed on the NYSE, and would like to do this within a S&S ISA (probably next tax year). As far as I understand, international shares are eligible to be held with an ISA, but an ISA must be held in sterling. This means that whatever platform I use will charge a currency conversion fee, or other charge, on top of any dealing fees. The amount I plan to invest on the NYSE will probably be around £3000-£5000, although I am likely to purchase other UK based ETFs or mutual funds within the same ISA up to a total value of around £10,000 over the tax year. Can anyone provide advice on the cheapest way of doing this?

Also, my rational on including this investment in an ISA is to avoid capital gains tax when I come to sell - I plan to hold the stock for at least 10 years, probably longer. The company is unlikely to pay any dividend at all in this time, so I do not need to worry about US taxes on dividends. Is this thinking rational?

I wouldn't. The personal allowance for CGT is £11k p.a.: you would do very well to turn approx £4k into £15k in ten years, and even if you did better you could avoid CGT by splitting your sale across two tax years. So I'd consider just buying the shares outside the ISA tax shelter, which would avoid the provider's irksome ISA fees.

Pincher

If scrip dividend is available as an option, it would avoid drip drip currency charges, and possibly tax at source.

Sam_J12

Pincher wrote: »

If scrip dividend is available as an option, it would avoid drip drip currency charges, and possibly tax at source.

The stock I am thinking of buying is unlikely to ever pay a dividend, so I think this negates any tax at source issues. What is scrip dividend?

Atreyu107

Sam_J12 wrote: »

The stock I am thinking of buying is unlikely to ever pay a dividend, so I think this negates any tax at source issues. What is scrip dividend?

SCRIP is a divdend paid as stock, rather than cash. It differs to DRIP in that the latter is paid as cash, and then reinvested by the broker (for a minimal commission charge, usually).

The problem with SCRIP is that very few execution only platforms allow SCRIP elections, mostly because they make reconciliation difficult on a large scale.

themanfromamarillo

Remember that when holding US shares you need to file a W8 or W9 IRS form with your broker.

http://www.iweb-sharedealing.co.uk/trading-services/financial-markets.asp

IronWolf

grey_gym_sock wrote: »

yes, in an ISA, you will pay FX charges both when you're paid a non-sterling dividend, and again when you reinvest the cash in a share quoted in another currency.

most providers charge at least 1% for FX, and it can be as high as about 2%.

IG charge only 0.3% for FX. though if you don't deal for 2 years, then they start charging you an inactivity fee of £12 per month.

idealing charge 0.5% for FX. and £5 per quarter for an ISA.

saxo charge 0.5% for FX. but have a minimum ISA balance of £50k, and an annual charge of £42.

ajbell youinvest charges 1% FX for trades, though only 0.5% for converting dividends back to sterling.

Do they? I have an ISA with them with a lot less than that and the annual charge is the same.