Moving Investment Trust Stock into an ISA - Cheapest Option

Tom_Brine

When I first started investing I set up a monthly payment into Scottish Mortgage investment trust through Baillie Giffords own platform. It was free to hold the stocks, no purchase charges etc so seemed a great idea, only paying stamp duty and fund charges.

I now find myself in a position of having over £16,000 in SMT in a non tax efficient wrapper. Since Baillie Gifford closed it own investment service the stock moved to H&L who for a period of three years are honouring the original fee structure. My intention was to keep buying until H&L's charges kicked in proper and then stop. 

However Id like to move the holding to the cheapest possible ISA offering for holding IT shares. I have to wait until April as I have already paid into a Vanguard ISA this year. The plan is to sell £12300 (Capital Gains Tax Allowance) in order to avoid CGT. The stock to date has cost me £6750. Will I avoid Capital Gains selling the full stock?

I pay £4000 a year into a LISA so could only pay £16000 into a new ISA in the new Tax year which is fine as I could sell £16000 worth, keep the rest in H&L and continue to buy with the discounted promotional rates for all of next year.

Any thoughts on the cheapest place to do this? I have thought maybe IWeb, but the £100 opening fee seems steep. Then it would be £5 to purchase the full £16000 in SMT. 

bowlhead99

Tom_Brine said:

However Id like to move the holding to the cheapest possible ISA offering for holding IT shares. I have to wait until April as I have already paid into a Vanguard ISA this year. The plan is to sell £12300 (Capital Gains Tax Allowance) in order to avoid CGT. The stock to date has cost me £6750. Will I avoid Capital Gains selling the full stock?

We can't answer what the gain would be because you haven't told us what the full stock is now worth (other than, I assume, it being over £16,000 worth).

For example, if the stock that originally cost £6750 is now worth £56750, you would have a £50,000 gain if you sold it all for £56750, or £25,000 gain if you only sold half of it (£28375 from the shares that had cost you £3375).

A £50k gain is well over your £12300 exempt amount for any one tax year, and even just selling half for a £25k gain (which you could split into a sale on 5 April and a sale on 6 April) may be a little bit more than the two exempt amounts for 2020/21 and 21/22. So no, in that example you wouldn't be able to sell 'the full stock' or even half of it. 

Sticking with that example, if you had £56750 of shares bought for £6750 which would produce a £50,000 gain if fully sold, but you don't need to fully sell it because you only want to get £16,000 of cash to fill the ISA, you would only need to sell about 28% of your holdings.  Selling a proportionate amount of 16000/56750ths of the shares would give you £16,000 of proceeds, and create 16000/56750ths of the full £50k gain, so your gain would be about £14100. That £14100 is a bit in excess of the 2020/21 annual exemption, but you could sell a bit on or before 5 April and a bit on or after 6 April so that you didn't go over the exemption in either 20/21 or 21/22.

You could use that logic with your real values, to see if you can stay under the limits while generating £16,000 of cash to feed the ISA.  For example if your IT shares are only worth £20k and you paid £6750 for them, there is only £13250 gain if you sell the whole lot - and if you don't sell the whole lot because you only need to sell 4/5ths of them to make £16k of sales proceeds, you will only make 4/5ths of the £13250 gain, which is £10600 of gain and comfortably under the annual exemption.

I pay £4000 a year into a LISA so could only pay £16000 into a new ISA in the new Tax year which is fine as I could sell £16000 worth, keep the rest in H&L and continue to buy with the discounted promotional rates for all of next year.
Any thoughts on the cheapest place to do this? I have thought maybe IWeb, but the £100 opening fee seems steep. Then it would be £5 to purchase the full £16000 in SMT. 

You could use the isa from Jarvis's execution only brokerage service https://www.x-o.co.uk, they are £5.95 to do the purchase and don't have a hefty account opening fee. Very basic website but works fine if you are only buying UK listed stocks and don't want to also buy open-ended funds etc.

Tom_Brine

Thanks for the head up on X-O, looks perfect for what I want.

The total invested to date is £6,750.00 since 2017 and value as of today is £16,505.70. So I can sell £16,000 worth an put into an X-O ISA from 5th April. Thanks very much

Old_Lifer

With the day of reckoning looming and the next Budget due early March,  we should not automatically assume that the CGT allowance will continue at its present level.

Alexland

Tom_Brine said:

So I can sell £16,000 worth an put into an X-O ISA from 5th April.

5th April is still this tax year so the ISA contribution would be after 5th April or from 6th April.

Tom_Brine

Thanks Old Lifer and ALexland.
Agreed on the CGT allowance, but I have to wait until next year to pay into another ISA so hopefully its not changed before.

bowlhead99

Tom_Brine said:

Thanks Old Lifer and ALexland.
Agreed on the CGT allowance, but I have to wait until next year to pay into another ISA so hopefully its not changed before.

As a practical point it will take a few days to get the sale proceeds from the sale at HL back to your bank account to be able to afford the contribution to the new X-O account (standard settlement on the stock market is T+2, then there is the time to get the money from HL after requesting it). So it would make sense to do your sale at the end of this tax year so that the annual CGT exemption you're using up nearly all of, is the 2020/21 one rather than the 2021/22 one. You can still do the purchase in 2021/22 of course.