Funds or stocks & shares ISA

timshaw

Evening all,

I’m on my preliminary search for my first real investment after years of simply saving.

What is the main difference if I invested in a fund compared to a stocks & shares ISA, apart from the >£1000 taxable profit on the fund?

Thanks in advance

Tim

EthicsGradient

Do you mean the £2000 allowance you get on dividends (whether from funds or company stocks), not £1000?
At smaller amounts, no, there's very little difference. If you might want to buy a fund or stock and then keep it a long time before selling it, there could also capital gains tax implications if you hold it outside an ISA. At the moment, the CG yearly allowance before you start paying that tax is £12,000, so if someone had, say, bought a fund 10 years ago for £15,000, and it had now doubled in value to £30,000 (quite possible), there would be tax to pay (on £3,000 gain, at 10% or 20% depending on your tax band) if you sold it all in one year.

Linton

timshaw wrote: »

Evening all,

I’m on my preliminary search for my first real investment after years of simply saving.

What is the main difference if I invested in a fund compared to a stocks & shares ISA, apart from the >£1000 taxable profit on the fund?

Thanks in advance

Tim

An S&S ISA is an account into which you can put funds. Gains, either dividends or capital growth, are tax free. The main alternatives are buying the funds in a pension, whioch is also tax free, or outside any tax shelter, which isnt.


Your question regarding funds or S&S ISA confuses the petrol with the fuel tank.

timshaw

Linton wrote: »

An S&S ISA is an account into which you can put funds. Gains, either dividends or capital growth, are tax free. The main alternatives are buying the funds in a pension, whioch is also tax free, or outside any tax shelter, which isnt.


Your question regarding funds or S&S ISA confuses the petrol with the fuel tank.

My example is that I’m looking at H&L and they have some fund options or they also have a S&S ISA. Unless I exceed my £1000 taxable profit point, I don’t know why I’d choose the ISA over the fund?

Sea_Shell

What do you mean by "£1000 taxable profit point". Are you confusing it with the £1000 "allowance" on interest from savings??

Reed_Richards

You are some way off understanding what you are doing. An ISA is just a wrapper in which you can hold funds or other investments. So the choice you think you have isn't real. There is no such thing as a "£1000 taxable profit point". You are only taxed on profits when you sell your investment, the tax is called Capital Gains Tax and the point at which you pay tax is much higher than £1000. Investments held within an ISA are free from Capital Gains Tax

AnotherJoe

You need to do some more reading, you are totally confused at the moment.

Think of an ISA as a box into which you can put cash and funds and shares.
When you open an ISA you are just getting the box. If you open it with say £5k you've got the box and there's £5k of your cash in it.
If its a fund and shares ISA, that just means its the type of "box" you are allowed to put cash, funds and shares in.

A cash ISA is a "box" that can only hold cash.
The funds you can buy via H&L can be bought and held outside an ISA, or put into a fund and shares ISA. It will be the same fund in both cases.

The main reason to open a funds and shares ISA is that once your funds and shares are inside , the tax man leaves them alone. Not just profits but also the need to report . Keeps life simple even if initially the amounts are small enough theres no tax to pay anyway.

dunstonh

What is the main difference if I invested in a fund compared to a stocks & shares ISA, apart from the >£1000 taxable profit on the fund?

The two things are totally different. It's a bit like comparing cars and petrol. Or cups and drink

An ISA is a cup. A fund is a drink. You can hold a drink in its own container or you can put it in a cup or a glass or other container. However, you cannot put a cup into a drink.

An ISA is one of a number of tax wrappers that the UK offers. You can hold the same funds in many of those tax wrappers. Usually with no cost difference. Or you can hold it "unwrapped".

You should aim to use the right (As in best) tax wrapper for your circumstances. Sometimes that will be ISA, sometimes pension, sometimes unwrapped, onshore bond or offshore bond amongst others. In each of those cases, the same investment funds can be used.

For most consumers, pension, ISA and unwrapped are the main three they will use nowadays.

Albermarle

You can see on this thread ( and many others ), that it causes confusion when posters ( not just the new ones ) just refer to ISA.
If everybody always defined S&S ISA or Cash ISA etc then here would be less posts at cross purposes.
A forlorn hope probably ….

AnotherJoe

Albermarle wrote: »

You can see on this thread ( and many others ), that it causes confusion when posters ( not just the new ones ) just refer to ISA.
If everybody always defined S&S ISA or Cash ISA etc then here would be less posts at cross purposes.
A forlorn hope probably ….

In this case I dont think it would make a jot of difference.

timshaw

Reed_Richards wrote: »

You are some way off understanding what you are doing. An ISA is just a wrapper in which you can hold funds or other investments. So the choice you think you have isn't real. There is no such thing as a "£1000 taxable profit point". You are only taxed on profits when you sell your investment, the tax is called Capital Gains Tax and the point at which you pay tax is much higher than £1000. Investments held within an ISA are free from Capital Gains Tax

I have read that there is a limit of £1000 on personal savings allowance