Questions about ISA

bushido1

Hello,

As I stated in the title, I have some questions about ISA:

1/ Can you hold Gilts in an ISA? (example: IGLS, INXG, etc.)

2/ Imagine I have 100k£ to invest as a new investor.
And tomorrow I am going to invest 85k£ in VWRL and 15k£ in VGOV.
Which one would you use the ISA with and why?

3/ Imagine in the past years I used 50k£ of my ISA for VGOV and I still have them there.
Can I now take out the 50k£ VGOV and put 50k£ of VWRL through the ISA?
Or once I take out the stocks/bonds from the ISA I can't put different stocks/bonds back in to it?

4/ If at the beginning of the taxable year (mid April) I have clear on what I want to spend this years ISA and I have the money to top it.
Is it better to top it now or is it better to wait until the end of the year (March 2017) and doing it them? Why?

Cheers!!

colsten

1 - check with your chosen platform - they will tell you for each symbol whether it is eligible for an ISA or SIPP

2 - the max you can deposit into an ISA is £15,240 per year

3 - inside an ISA, you can sell and buy as much as you like, within the funds available in your ISA. If you take any money out of your ISA, you are subject to 2 above

4 - a tax year begins on April 6 each year. Whether you want to invest on April 6 or later is your decision.

bowlhead99

For 2, there is an argument to say that it is rather more efficient to hold your interest-bearing investments like vgov inside the tax wrapper and your equity investments outside.

The rationale for this is because the ISA can avoid paying tax on the interest distributions made from vgov, while the dividend distributions and capital gains from Vwrl would have been largely covered by your annual dividend allowance and annual CGT allowance anyway (and if not, then at least be taxed at a lower rate).

However the counterpoint to this is that the long term goal is to maximize the size of your tax wrappers. Investing £100k in equities via ISAs can double the size of those ISA wrapped pots of assets every decade, while (generalizing) government bonds will barely grow at all, relatively.

ChesterDog

Just to add, on point 4 - unless you are hoping to time the market (don't), you will naturally want to top up your ISA and get that money invested within it as soon as possible.

Superscrooge

bushido1 wrote: »

4/ If at the beginning of the taxable year (mid April) I have clear on what I want to spend this years ISA and I have the money to top it.
Is it better to top it now or is it better to wait until the end of the year (March 2017) and doing it them? Why?

Cheers!!

There have been several articles over the years regarding ISA investments and whether it's best to invest at;

1. Start of the tax year
2. End of the tax year
3. Drip feed throughout the year.

Historically because of the extra 'time in the market'. Investing the full allowance at the start of the tax year gives the best returns.

The below article is one that compares lump sum versus drip feeding

http://monevator.com/lump-sum-investing-versus-drip-feeding/

bushido1

Double post. Sorry.

bushido1

colsten wrote: »

1 - check with your chosen platform - they will tell you for each symbol whether it is eligible for an ISA or SIPP

2 - the max you can deposit into an ISA is £15,240 per year...

bowlhead99 wrote: »

For 2, there is an argument to say that it is rather more efficient to hold your interest-bearing investments like vgov inside the tax wrapper and your equity investments outside.
...

ChesterDog wrote: »

Just to add, on point 4 - unless you are hoping to time the market (don't), you will naturally want to top up your ISA and get that money invested within it as soon as possible.

Thanks to all for the answers!! Anyways there is a couple of points that I am still not very convinced about, so I will ask them in a different way.

1/ Imagine you have 0£ cash, 50k£ VWRL (taxable) and 50k£ VGOV (wrapped inside an ISA).
Tomorrow you decide that you want to put all your money in VWRL (100k£).
Can you do this while keeping 50k£ VWRL (in taxable) and the other 50k£ VWRL (inside ISA)?
Or in these case you would be loosing the 50k£ ISA wrapper forever?

2/ Imagine you have 0£ cash, 100k£ VWRL (taxable) at April 15th 2016 and you are going to make 0 money in the next 12 months.
Is there any benefit of moving 15k£ to the ISA today vs doing it on April 2nd 2017. Or is it exactly the same?

3/ Also, are TIPS (Treasury Inflation Protected Securities) such as INXG taxable? Is it worth using a ISA for them?

Eco_Miser

bushido1 wrote: »

1/ Imagine you have 0£ cash, 50k£ VWRL (taxable) and 50k£ VGOV (wrapped inside an ISA).
Tomorrow you decide that you want to put all your money in VWRL (100k£).
Can you do this while keeping 50k£ VWRL (in taxable) and the other 50k£ VWRL (inside ISA)?
Or in these case you would be loosing the 50k£ ISA wrapper forever?

Assuming VWRL is ISAable, yes. You sell your VGOV, you now have cash within the ISA, which you use to buy VWRL. Of course it probably won't be exactly £50k anymore, transactions cost, and prices move.

bushido1 wrote: »

2/ Imagine you have 0£ cash, 100k£ VWRL (taxable) at April 15th 2016 and you are going to make 0 money in the next 12 months.
Is there any benefit of moving 15k£ to the ISA today vs doing it on April 2nd 2017. Or is it exactly the same?

If the dividend (of all your unwrapped shares/etfs) is more than £5000, ISAing them before the dividends are paid will save tax.

If I had £0 cash and expected to make £0 in the year, I'd be putting some of that £100k into high interest current accounts to live off.

bushido1

Eco_Miser wrote: »

Assuming VWRL is ISAable, yes. You sell your VGOV, you now have cash within the ISA, which you use to buy VWRL. Of course it probably won't be exactly £50k anymore, transactions cost, and prices move.
If the dividend (of all your unwrapped shares/etfs) is more than £5000, ISAing them before the dividends are paid will save tax.

If I had £0 cash and expected to make £0 in the year, I'd be putting some of that £100k into high interest current accounts to live off.

Thanks a lot.

I have one last question:

If I would be to wrap my ISA between two stocks (for example: Vanguard Global Small Cap and VWRL). What things should I have in to account when deciding which of those two to choose?


Small Cap Global
https://www.vanguard.co.uk/uk/portal/detail/mf/overview?portId=9158&assetCode=EQUITY##overview

VWRL
https://www.vanguard.co.uk/uk/portal/detail/etf/overview?portId=9505&assetCode=EQUITY##overview