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Flexible ISA abuse for maximum profit
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xnoxxnox
Posts: 95 Forumite
At the start of the year, I'm thinking to withdraw my ISA and invest into things to maximize savings / dividend / capital gains allowance, and then before the end of tax year shelve everything back into the ISA to roll-over that allowance for the long term.
Is my thinking somehow flawed?
What I am hoping to avoid is realizing losses inside an ISA and thus effectively destroying allowance I could have used up outside of an ISA anyway. Or like doing all of this flip-floping will only cause hassle and extra fees to unbed-and-breakfast + bed-and-breakfast.
Is my thinking somehow flawed?
What I am hoping to avoid is realizing losses inside an ISA and thus effectively destroying allowance I could have used up outside of an ISA anyway. Or like doing all of this flip-floping will only cause hassle and extra fees to unbed-and-breakfast + bed-and-breakfast.
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Comments
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I've previously done this with a cash ISA and it can be useful if you want to transfer the ISA into a product that's not yet available, but will be in a future tax year.
I'm not sure I'd bother to do so with investments. What's to gain from using CGT and dividend allowances when the investments would otherwise be exempt in the ISA? Over the long term investments will tend to grow in value more often than they'll shrink, so you'll use up more of your ISA allowance returning the funds to the ISA each tax year.0 -
Also, can you withdraw prior year contributions from an ISA and then put them back in again before the year? I thought it was just current year contributions - could be wrong though, in which case, I apologise.Northern Ireland club member No 382 :j0
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It's current and prior year money.0
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What's to gain from using CGT and dividend allowances when the investments would otherwise be exempt in the ISA?
Now if you have a mixture of ISA and non-ISA investments then it might make sense to bed-and ISA some of the non-ISA investments in order to crystallise a capital gain and use up your allowance. In this case you would probably need to do some sort of counter-trade to generate cash in the ISA. But you don't need to have a flexible ISA to do this.Reed0 -
It's current and prior year money.0
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[FONT=Verdana, sans-serif]Yes I think your thinking is flawed unless there is something you want to do with the money outside the ISA which you can't do inside the ISA.[/FONT]
[FONT=Verdana, sans-serif]Say I take out money from my ISA and make use of the £1,000 saving allowance, £2,000 dividend allowance and £11,700 CGT allowance. Then I put the money back in the ISA.[/FONT]
[FONT=Verdana, sans-serif]What have I gained by doing that? Absolutely nothing apart from a lot of fees, a tax return and using up allowances that might have been useful elsewhere.[/FONT]
[FONT=Verdana, sans-serif]If you have a potential loss in your ISA there is no way of transferring that loss to outside the ISA and setting it against a non ISA profit. You would have to sell and make a loss in the ISA before you can transfer the money out.[/FONT]0 -
What I realized, I first need to max out the ISA allowance... and that seems to be impossible lol.
I do understand the bit of crystalizing losses/gains in the ISA to take money out, I'm just thinking about the impending market crash. Take money out, rebuy things outside of an ISA, watch them implode, put fresh money back into an ISA. Cause I don't see why the market risk should be held inside an ISA all year around given that CGT losses and gains might be useful for tax planning outside of an ISA too.
I.e. i wonder if it makes sense for most people, including me, to even buy things inside of an ISA if they are unlikely to hold things long enough to break CGT/dividend allowance and if such gains don't push one into a new tax bracket.
The more I think about it, the ISA stuff makes less and less sense. It would be much simpler to just scrap it, and bump up CGT allowance to accumulate at 20k/year and be done with it.0 -
I've been depositing my annual allowance (Cash ISA) just before end of year, leaving it till 6 April then withdrawing. Thus saving my tax free status till I can afford to use it properly in the coming year (expecting to sell property)I am not a cat (But my friend is)0
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