Income vs Accumulation - Within ISA

ChilliBob

Guys,
I've been reading up about income vs accumulation fund classes more generally. It appears pretty simple stuff, in one case you get income, in another case any income is reinvested automatically for you. From an ISA perspective the accumulation route surely means besides reinvesting benefits it allows you to increase the size of the ISA due to dividends right?
I just want to make sure that the Dividend 'income' in the accumulation class doesn't count towards your 20k limit and hence blow it up beyond what's allowed. Which I believe it does *not*.

So:
Income:
Put 20k in ISA, perhaps you get £50 of dividends on underlying investments, goes into your nominated bank account
Acca:
Put 20k in ISA, £50 of dividends is reinvested, increasing the size of the ISA.. 

A slight aside, I'm assuming the acca route also doesn't trigger a dealing charge? - i.e. if you were to take the £50 income above and purchased more of the same shares you'd have £X to pay (platform dependant).

dunstonh

From an ISA perspective the accumulation route surely means besides reinvesting benefits it allows you to increase the size of the ISA due to dividends right?

It makes no difference effectively.    Income units where the income is reinvested to buy more units (in that fund or as part of  rebalancing strategy) means the income stays in the ISA value.
Think of it as 4x5=20 for acc units and 5*4=20 for income units.

I just want to make sure that the Dividend 'income' in the accumulation class doesn't count towards your 20k limit and hence blow it up beyond what's allowed. Which I believe it does *not*.

It does not.   

A slight aside, I'm assuming the acca route also doesn't trigger a dealing charge? - i.e. if you were to take the £50 income above and purchased more of the same shares you'd have £X to pay (platform dependant).

It does not.  And most platforms do not charge for income reinvestments either.  Although a small number may do (you then need to question whether your platform matches your strategy if you start seeing fee potential)

Alexland

ChilliBob said:

£50 of dividends on underlying investments, goes into your nominated bank account

The dividends are paid into your ISA account unless you have instructed the platform to send you the money.

ChilliBob

I see, so in my theoretical example the only difference would be:
1. Income would allow you to choose where to reinvest if you decided to do that. 
2. Income would incur a cost to reinvest, platform dependant, e.g. Vanguard = Free, iWeb - £5
3. Reinvestment via acca is limited, naturally, but more cost effective if your platform has a fee per fund trade.
The above assumes the income from income units are pushed back to the ISA and not to the Nominated account.

Thanks for your reply, very helpful

ChilliBob

Alexland said:

ChilliBob said:

£50 of dividends on underlying investments, goes into your nominated bank account

The dividends are paid into your ISA account unless you have instructed the platform to send you the money.

I shall check when I set it up, I have a nagging feeling I selected nominated account for some reason.