Is it worth doing Bed and ISA next tax year?

enthusiasticsaver

In previous years my DH and I have moved investments over from our share dealing accounts (non isa) with Halifax share deal to our Halifax stocks and shares isa accounts and have maximised allowances for the last few years.

We have £80k (unwrapped) between us in income funds (£50k in my name and £30k in my DHs name). We use the monthly dividend income to supplement our pensions as we took early retirement and as they amount to less than the dividend allowances for each of us (£2k each from April 2018) I was wondering if it is worth moving them to our ISAs after 6 April?

We can either leave them as they are and we wont need to declare the dividends for tax purposes as my DH gets around £1k income per year and I get around £1750 per year. I am a non taxpayer for the next two years until a second pension kicks in for me and I am only using around £5k of my PA at the moment and have transferred 10% to my DH as he is a basic tax payer as his pension is £23k from a DB scheme. I fully fund my SIPP with the £2880 per year and we have plenty of cash at our disposal.

Does anyone think it is worth the hassle of selling the income units and then transferring into the ISAs given that is the only way we can do it?

Is there something I have forgotten?

Given they are income funds I think Capital gains tax is unlikely to be an issue.

Keep_pedalling

With £50k invested CG could effect then long term, and there is always the risk that the dividend allowance could disappear with a change of government, so yesI would still favour getting. As much as possible into ISAs.

The ability for the surviving partner to inherit a larger ISA allowance on the first death might be useful as well.

enthusiasticsaver

Keep_pedalling wrote: »

With £50k invested CG could effect then long term, and there is always the risk that the dividend allowance could disappear with a change of government, so yesI would still favour getting. As much as possible into ISAs.

The ability for the surviving partner to inherit a larger ISA allowance on the first death might be useful as well.

That is one thing I had forgotten that if I die my husband could inherit my ISA so as he is a tax payer it would make sense to continue to use the allowances.

bowlhead99

enthusiasticsaver wrote: »

That is one thing I had forgotten that if I die my husband could inherit my ISA so as he is a tax payer it would make sense to continue to use the allowances.

And vice versa, given you say you are only a non taxpayer until a second pension kicks in. It would be quite convenient for you to be able to inherit a six figure ISA wrapper from your husband rather than some smaller ISA wrapper, so, might as well have him make use of the allowance each year it comes around. And you never know what will happen to dividend allowances, interest income allowances or annual ISA contribution allowances in the future.

You mention capital gains not being a problem because they're income funds but presumably you expect some long term capital growth from them as you want to be able to keep pace with inflation and generally they won't pay out their entire total return as dividends (assuming some of the income funds are equity-based income funds).

If you didn't already have ISAs and didn't forsee any possible need for them, you're right it's simplest not to bother. But as you do already have ISA accounts and you do see some *possible* eventual need for them... (especially if one of you eventually passes on and you or he then only has one set of income allowances and CGT allowances against all the assets...) - you might as well as make the most of them when offered.

enthusiasticsaver

bowlhead99 wrote: »

And vice versa, given you say you are only a non taxpayer until a second pension kicks in. It would be quite convenient for you to be able to inherit a six figure ISA wrapper from your husband rather than some smaller ISA wrapper, so, might as well have him make use of the allowance each year it comes around. And you never know what will happen to dividend allowances, interest income allowances or annual ISA contribution allowances in the future.

You mention capital gains not being a problem because they're income funds but presumably you expect some long term capital growth from them as you want to be able to keep pace with inflation and generally they won't pay out their entire total return as dividends (assuming some of the income funds are equity-based income funds).

If you didn't already have ISAs and didn't forsee any possible need for them, you're right it's simplest not to bother. But as you do already have ISA accounts and you do see some *possible* eventual need for them... (especially if one of you eventually passes on and you or he then only has one set of income allowances and CGT allowances against all the assets...) - you might as well as make the most of them when offered.

You make some good points so yes I think we will go ahead and use the allowance next tax year. I think there will certainly be some long term growth on the income funds but not as much as if they had been accumulation funds. The reason I say capital gains wont be a problem is that the income funds seem to grow in value much less than other accumulation funds we hold naturally as we are withdrawing the income monthly. Of course if the government does away with the £11800 annual allowance then that changes the story. I cannot see us needing to withdraw them all in one year so we would do it in as tax efficient way as possible. I guess within an ISA we would not need to worry about it at all though.

bowlhead99

enthusiasticsaver wrote: »

. I guess within an ISA we would not need to worry about it at all though.

Yes, within an ISA not only do you not need to worry about paying the taxes, more importantly if you shove your unwrapped assets into ISAs you don't need to do the recordkeeping to *prove* that you don't have to worry about any taxes due to your own personal circumstances and the relevant facts and transaction values and dates.

Unless you have lots of time on your hands and a passion for record keeping, keeping the records safe and calculating the "no taxes" can be more of a pain than actually paying a nominal amount of tax

Tom99

[FONT=Verdana, sans-serif]With Halifax you can't do an instant bed and ISA online as it takes nearly week to get the sale funds into the ISA and there will be two dealing fees.[/FONT]
[FONT=Verdana, sans-serif]However you used to be able to do an instant bed and ISA over the phone and they only charged one dealing fee but I don't know whether they still offer that facility.[/FONT]

capital0ne

Always use your ISA allowance if you can - it's no brainer.

Look at how people are moaning about the dividend allowance being lowered to £2k from £5k. Well we've had two years to move investments into an ISA, for couple that's £80k, and next week it'll be another £40k, so a total of £120k could be wrapped up ice and snug in an ISA.

I'm guessing most people on this site know this or don't have largish portfolios.