Moving money from investment fund to S&S ISA

edited 30 November -1 at 1:00AM in ISAs & Tax-free Savings
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[Deleted User][Deleted User] Forumite
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edited 30 November -1 at 1:00AM in ISAs & Tax-free Savings
I'm over £6000 up on an investment fund with Vanguard, over a period of 18 months. I currently have this year's 20k ISA allowance available, and a cash ISA with just over 20k in it. Is it possible to move the cash ISA to a S&S ISA then move 20k from the Vanguard fund into it, without any tax liability? Thanks.

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  • eskbankereskbanker Forumite
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    To get an unwrapped investment into a S&S ISA essentially entails selling it and then repurchasing under the ISA umbrella, although many providers wrap this up as if it was a single Bed & ISA process. The key point here is liability for CGT, which comes into play if your crystallised gain exceeds your annual CGT allowance, but if your gain is 'only' £6K then this won't be an issue....

    You could also transfer money from cash ISA to S&S ISA without affecting your 2019/20 £20K allowance, but aren't obliged to in any way, as you can maintain multiple separate ISAs as long as you only pay new money into no more than one of each type in any tax year.
  • AlexlandAlexland Forumite
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    Also be careful using a short 18 month period result as the basis of your decision making. While it shows what the stock (and currency) markets are capable of delivering it could so easily have been in the other direction. Remember the more you add to your investments the lesser a negative market movement it would need to be to reverse out those gains. Keep any money you are likely to require access to in the next 5 years in cash to limit the risk that you would withdraw at a loss.
  • AlbermarleAlbermarle Forumite
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    Maybe just move part of the cash . A part transfer should be no issue and could be repeated at some point in the future. Markets have been generally positive for a few years now but it can't last forever. That's not to say do not invest but just to be careful.
  • [Deleted User][Deleted User] Forumite
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    Thanks guys for the advice. I'm thinking the way forward is to transfer the cash ISA from Nationwide to a new S&S ISA with Vanguard, and then transfer 20k from the Vanguard investment to the new S&S ISA. Longer term, I want to run down the Vanguard investment by 20k per year (or whatever the prevailing allowance is) so that I end up with just the ISA. As noted, there shouldn't be a CGT issue, but I was wondering about income tax as well.
  • eskbankereskbanker Forumite
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    As noted, there shouldn't be a CGT issue, but I was wondering about income tax as well.
    Your investment outside the ISA will generate dividend income (which may or may not be reinvested) and this is subject to income tax, although there is a dividend 'allowance' (strictly a nil-rate band) of £2K for 2019/20 so chances are you won't actually pay income tax on the income derived from your non-ISA investment.
  • [Deleted User][Deleted User] Forumite
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    eskbanker wrote: »
    Your investment outside the ISA will generate dividend income (which may or may not be reinvested) and this is subject to income tax, although there is a dividend 'allowance' (strictly a nil-rate band) of £2K for 2019/20 so chances are you won't actually pay income tax on the income derived from your non-ISA investment.


    Yes, the dividend is well below the threshold.


    I assume if and when CGT is payable, e.g. if the annual allowance is exhausted, it's done on a pro-rata basis. For example: £60k initial investment increases in value by £6k. If £6k (about 9%) of the fund is then sold, the CGT liability would be £540, i.e. 9% of the £6k value increase. Is that how it works?
  • eskbankereskbanker Forumite
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    I assume if and when CGT is payable, e.g. if the annual allowance is exhausted, it's done on a pro-rata basis. For example: £60k initial investment increases in value by £6k. If £6k (about 9%) of the fund is then sold, the CGT liability would be £540, i.e. 9% of the £6k value increase. Is that how it works?
    It depends how you define 'liability' - if the gain that you crystallise when selling is £540 and you've used your CGT allowance, then the £540 is subject to tax at 20%, so £540 is 'liable to tax' but the 'tax liability' is £108.

    https://www.gov.uk/capital-gains-tax/work-out-need-to-pay
  • Some incidental info about transfers from a cash ISA to a Vanguard S&S ISA which may be useful for readers of this thread: Vanguard told me they don't do partial transfers.



    Their apparent reason for only allowing full transfers: "a business decision made when the platform was launched in relation to the complexities of the transfer process. We may look to introduce the functionality of partial transfers of cash in the future".
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