Is capital gains tax allowance on top of ISA allowance?

w00519773

This question follows on from a question I asked yesterday: https://forums.moneysavingexpert.com/discussion/6238340/do-any-uk-citizens-on-here-use-interactive-brokers#latest

Say I invest £20,000 in my Charles Stanley Stocks and Shares ISA over 12 months (long way off that).  Am I entitled to open an account (not a stocks and shares isa) with another broker and take advantage of the £12,300 capital gains tax allowance: https://www.gov.uk/capital-gains-tax/allowances, therefore making £32,300 of my gains tax free? 

This may be a naïve question, however I am trying to understand whether it is:

1) Stocks and shares ISA or capital gains tax allowance
or
2) Stocks and shares ISA and capital gains tax allowance

Albermarle

No 2 
But you are mixing up your terms a bit . The £20K for an ISA is not an allowance . It is a limit of how much new money you can add to it in a tax year . Once in the ISA, HMRC are not interested to what happens with the investments you make within it . Whether they make a loss, or a large gain, when you cash investments in , how much dividends are paid  etc , It does not matter. You do not mention your ISA investments in any tax return or communication with HMRC , as the ISA shelters all the investments from any tax liability.
Completely separately, if you invest outside an ISA ( or pension ) then your investments are potentially subject to CGT and/or Dividend tax , if you breach the allowances. 

w00519773

Albermarle said:

No 2 
But you are mixing up your terms a bit . The £20K for an ISA is not an allowance . It is a limit of how much new money you can add to it in a tax year . Once in the ISA, HMRC are not interested to what happens with the investments you make within it . Whether they make a loss, or a large gain, when you cash investments in , how much dividends are paid  etc , It does not matter. You do not mention your ISA investments in any tax return or communication with HMRC , as the ISA shelters all the investments from any tax liability.
Completely separately, if you invest outside an ISA ( or pension ) then your investments are potentially subject to CGT and/or Dividend tax , if you breach the allowances. 

Thanks, however I am not sure what you mean by: "No 2".  Do you mean "no to two" or "number two is the answer".  I believe you mean number 2 is the answer based on the rest of the text, however I just wanted to be clear.  Thanks again.

w00519773

Also, is it possible to move gains from one provider (Interactive Brokers - who do not offer ISAs) to another (Charles Stanley) to take advantage of the ISA? I believe the answer is no, but again just want to be clear.

eskbanker

w00519773 said:

Also, is it possible to move gains from one provider (Interactive Brokers - who do not offer ISAs) to another (Charles Stanley) to take advantage of the ISA? I believe the answer is no, but again just want to be clear.

You can't move gains as such - you can sell the investments outside the ISA and repurchase them within the ISA, and some providers will smooth this process and brand it as a combined 'Bed & ISA' exercise, but it still involves crystallising any gains (or losses) for CGT purposes at the point of starting that process.  Once those investments are within the ISA shelter, neither CGT nor income tax on dividends applies thereafter....

Albermarle

I meant Number 2 is the answer.
On the second point , when you contribute cash to a S&S ISA, it does not matter where the money originated from .
You can put in max £20K ( assuming no contributions to other ISA's in that tax year ) and it can come from dividends from investments already held, it can come from cash savings , it can come from an inheritance , a win at the races etc 

w00519773

Albermarle said:

I meant Number 2 is the answer.
On the second point , when you contribute cash to a S&S ISA, it does not matter where the money originated from .
You can put in max £20K ( assuming no contributions to other ISA's in that tax year ) and it can come from dividends from investments already held, it can come from cash savings , it can come from an inheritance , a win at the races etc 

Thanks.  Lets say I made a capital gain of £13,000 (£700 above the capital gains tax allowance of £12,300) using Interactive Brokers and I only invested £5,000 in Charles Stanley Direct for the year so far (that is about what I invest).  Could I move the £13,000 (or even just the £700) to Charles Stanley to benefit from the favourable tax treatment i.e. not pay tax on the £700 above the capital gains tax allowance (13,000-12300).  I believe the answer is no, however I want to be sure before I think about opening a live Interactive Brokers account.

eskbanker

w00519773 said:

Albermarle said:

I meant Number 2 is the answer.
On the second point , when you contribute cash to a S&S ISA, it does not matter where the money originated from .
You can put in max £20K ( assuming no contributions to other ISA's in that tax year ) and it can come from dividends from investments already held, it can come from cash savings , it can come from an inheritance , a win at the races etc 

Thanks.  Lets say I made a capital gain of £13,000 (£700 above the capital gains tax allowance of £12,300) using Interactive Brokers and I only invested £5,000 in Charles Stanley Direct for the year so far (that is about what I invest).  Could I move the £13,000 (or even just the £700) to Charles Stanley to benefit from the favourable tax treatment i.e. not pay tax on the £700 above the capital gains tax allowance (13,000-12300).  I believe the answer is no, however I want to be sure before I think about opening a live Interactive Brokers account.

That was the question I was answering earlier!  As you say, the answer is no - as soon as you sell your holding, it crystallises the £13K gain, thereby triggering a CGT liability on the surplus £700, and reinvesting the proceeds within an ISA makes no different to that gain, although it prevents future gains on those repurchased investments from tax.

You still seem to be mixing up different concepts - if you've realised a gain of £13K it's very unlikely that the value of that holding will be £13K, so you'd be paying more than £13K into the ISA in this scenario....

w00519773

You still seem to be mixing up different concepts - if you've realised a gain of £13K it's very unlikely that the value of that holding will be £13K, so you'd be paying more than £13K into the ISA in this scenario....

Thanks, I meant invest the gain in Charles Stanley and put the value-gain in a cash ISA.  Does that make sense?

eskbanker

w00519773 said:

You still seem to be mixing up different concepts - if you've realised a gain of £13K it's very unlikely that the value of that holding will be £13K, so you'd be paying more than £13K into the ISA in this scenario....

Thanks, I meant invest the gain in Charles Stanley and put the value-gain in a cash ISA.  Does that make sense?

Not really - when you've sold an asset, the composition of its current value between gain and original purchase price isn't an obvious basis for deciding what to do with the proceeds.  You can obviously choose to carve them up as you see fit, but there's no obvious (to me) logic or rationale in splitting up proceeds in the way you describe.

w00519773

w00519773 said:

Albermarle said:

I meant Number 2 is the answer.
On the second point , when you contribute cash to a S&S ISA, it does not matter where the money originated from .
You can put in max £20K ( assuming no contributions to other ISA's in that tax year ) and it can come from dividends from investments already held, it can come from cash savings , it can come from an inheritance , a win at the races etc 

Thanks.  Lets say I made a capital gain of £13,000 (£700 above the capital gains tax allowance of £12,300) using Interactive Brokers and I only invested £5,000 in Charles Stanley Direct for the year so far (that is about what I invest).  Could I move the £13,000 (or even just the £700) to Charles Stanley to benefit from the favourable tax treatment i.e. not pay tax on the £700 above the capital gains tax allowance (13,000-12300).  I believe the answer is no, however I want to be sure before I think about opening a live Interactive Brokers account.

That was the question I was answering earlier!  As you say, the answer is no - as soon as you sell your holding, it crystallises the £13K gain, thereby triggering a CGT liability on the surplus £700, and reinvesting the proceeds within an ISA makes no different to that gain, although it prevents future gains on those repurchased investments from tax.

You still seem to be mixing up different concepts - if you've realised a gain of £13K it's very unlikely that the value of that holding will be £13K, so you'd be paying more than £13K into the ISA in this scenario....

thenewcomers answer to my other question here seems to contradict this answer: https://forums.moneysavingexpert.com/discussion/6238340/do-any-uk-citizens-on-here-use-interactive-brokers/p1