Should I be using a S&S ISA? 26 February 2018 at 6:20PM in ISAs & tax-free savings 4 replies 469 views

aspley

I received 2,000 shares from my SAYE work scheme in August 2015. I'm looking to seek them in Spring 2019. The value has already increased by £21k.

Does it make financial sense to place them in S&S ISAs this and next financial year?

I don't really understand ISAs unfortunately.

bowlhead99

Holding them in an ISA means there is no tax to pay on any gains or income from them no matter what you eventually sell them for.

Unfortunately you can only directly put the sharesave shares into an ISA if you do it quickly after the sharesave matures. You've missed the boat on that.

So what you need to do is sell them on the stock market, get the cash, use the cash to contribute to an ISA (no more than £20k for the 2017/18 allowance) and then when you have money inside the ISA, buy back the same shares off the stock market. You'll find many brokers and investment platforms who can handle the three stages of the process for you (sell / move cash into ISA account/ re-buy).

Let's say the shares are now worth £40k and you originally paid £19k for them. If you sell 1000 of the shares you will get £20k of proceeds and those 1000 shares only cost £9.5k so the gain is £10.5k. Conveniently below your annual exemption for capital gains tax.

Then on 6 April you could sell another chunk of shares and make another big gain but again it would be below the exempt amount so no tax to pay. Depending on the exact prices you may or may not get it done in just two big chunks like that. If the sales proceeds are only £30-40k it's pretty easy, but if they are worth a lot more (or increase more by April) you might need to use some of the following year's allowance too.

It is worth playing with the maths to ensure you can avoid all the CGT. Of course it can be a false economy waiting until April to sell the next batch if over the next month the shares halve in value. You'd have been better taking today's price and paying the tax But if you are definitely going to keep them until 2019 come what may, I guess that's not an issue and your goal should just be to use up your allowances where you can.

aspley

Thank you for your response. You've cleared up a lot of my queries - and got me thinking in the right direction.

Ultimately, the funds will be for a property purchase next spring or summer. Selling now is fine. I may look at selling some within the next month and more at the beginning of the following tax year.

I paid £9k for them and they're worth £30k so I could sell half now and the other half in April and just miss paying or pay minimal CGT.

Now I need to find out how to sell the shares in this way without paying a company through the nose.

Thank you for your help. Much appreciated.

bowlhead99

https://www.x-o.co.uk will let you transfer share into their nominee account and sell for £5.95 a trade; they also offer ISA accounts in which you could hold and buy/sell UK listed shares without high ongoing fees for providing the service.

aspley

That's fantastic. I will take a look at that tomorrow morning.