Stocks & Shares ISA Question

krish123

Hi All,

I have a S&S ISA with charles stanley direct that i have invested in for many years now. I have some spare cash and wanted to dip my toe into a few US/Chinese single stocks so have opened an account with freetrade.

Now i thought i could also open a S&S ISA with them and contribute so long as the total does not exceed £20K between both my ISA's but this does not seem to be the case?

If i have to stick with a general investment account what are the tax implications? Im looking at buying dividend growth stocks, so wanted to avoid constant tax.

Thanks in advance.

masonic

You can only add new money to one S&S ISA per tax year, so you are correct that if you have paid into the CSD S&S ISA during this tax year you will not be able to fund a Freetrade S&S ISA.

What "constant tax" are you trying to avoid? ISAs do not generally prevent the imposition of foreign withholding taxes, such as US tax on dividends. There are generous allowances for UK tax on capital gains and dividends. The downside will be the record keeping required.

krish123

i have already starting putting money into my CSD ISA this tax year so that rules out S&S ISA with freetrade then.

So it will have to be a general investment account. In the case i will pay no dividends on tax up to £5000? What a about capital gains?

I will also fill out W8BEN form to eliminate tax on dividends on US stocks, so really i shouldnt pay any tax at all?

This will be a much smaller portfolio but do want to scale it in the future.

Linton

There is a capital gains allowance of £12300 so as long as you have no significant capital gains elsewhere I cant see it being a problem.  Note that you are only charged CGT on gains when you sell, not simply when the price goes up.  So even if your gains did approach the allowance you would avoid tax by spreading your sales across 2 tax years.

Alexland

krish123 said:

In the case i will pay no dividends on tax up to £5000?

The dividend allowance was reduced to £2k several years ago, more details here

https://www.gov.uk/tax-on-dividends

dunstonh

So it will have to be a general investment account. In the case i will pay no dividends on tax up to £5000? What a about capital gains?

£2000 not £5000.  CGT is £12,300.   Remember with a GIA (unwrapped holdings) you need to retain purchase and sales information.  

krish123

Linton said:

There is a capital gains allowance of £12300 so as long as you have no significant capital gains elsewhere I cant see it being a problem.  Note that you are only charged CGT on gains when you sell, not simply when the price goes up.  So even if your gains did approach the allowance you would avoid tax by spreading your sales across 2 tax years.

Ah makes sense. As my CSD funds are all ISA protected i do not have to worry about gains or dividends in that account right?

So essentially i must make sure my dividends dont exceed £2K and capital gains dont exceed £12300 in any one year is that correct? Like you say if they do, i can partially sell to keep under tax allowance.

I think i will be ok with this general account with freetrade then. It will take a long long time to build dividends to 2K and i can manage the Capital gains situation.

krish123

dunstonh said:

So it will have to be a general investment account. In the case i will pay no dividends on tax up to £5000? What a about capital gains?

£2000 not £5000.  CGT is £12,300.   Remember with a GIA (unwrapped holdings) you need to retain purchase and sales information.  

Thanks just read up its now £2K. 

Whats the best way to record purchase and sales info in your opinion? Freetrade are fairly new so not sure i can rely or even if they have this info recorded through their app. 

Alexland

krish123 said:

I think i will be ok with this general account with freetrade then. It will take a long long time to build dividends to 2K and i can manage the Capital gains situation.

In addition to the above you might also need to consider how the dividend income plays into your overall adjusted net income for child benefit, personal allowance, etc depending on your circumstances particularly relevant if you are a high earner.

https://www.gov.uk/guidance/adjusted-net-income

Every pound of dividends I get from a GIA is another pound I need to put in my pension which is why I don't tend to use them for anything more than signup incentives.

masonic

krish123 said:

I will also fill out W8BEN form to eliminate tax on dividends on US stocks, so really i shouldnt pay any tax at all?

W8BEN does not eliminate tax on dividends on US stocks. You'll still pay 15% whether in an ISA or GIA. You'll need to hold in a SIPP to eliminate the tax.

ColdIron

krish123 said:

Whats the best way to record purchase and sales info in your opinion?

Save and keep your contract notes