What to do once maxxed out annual pension and ISA limits....

solidpro

Lets say you've got a load of savings in cash/premium bonds.

If you've already maxxed out your annual ISA and SIPP allowances. What's the next best thing?

Thanks

Alistair31

Wait until April and start over  

or 

GIA? 

tacpot12

If you don't have a spouse that you can give them to so that they can use their tax free limits, a General Investment Account (the GIA that Alistair31 referred to) is your only option. A GIA will typically allow yo to do everything you can with a Stocks and Shares ISA, but without the tax wrapper, so you need to pay Capital Gains Tax on any profit, and keep the records to do so. You have a CGT allowance of £12,300 this year, so you won't pay any tax unless you make more than this much profit when you sell them. 

I have a GIA that I am using while I wait for the next tax year's ISA allowance to arrive. Roll on April 6th!

chucknorris

solidpro said:

Lets say you've got a load of savings in cash/premium bonds.

If you've already maxxed out your annual ISA and SIPP allowances. What's the next best thing?

Thanks

The first £2,000 of dividend income which is taxed at 0%, and also the savings allowance too.

I am in the same sort of position as you, but I rank my GIA more than my £50k in premium bonds.

isayhello

tacpot12 said:

If you don't have a spouse that you can give them to so that they can use their tax free limits, a General Investment Account (the GIA that Alistair31 referred to) is your only option. A GIA will typically allow yo to do everything you can with a Stocks and Shares ISA, but without the tax wrapper, so you need to pay Capital Gains Tax on any profit, and keep the records to do so. You have a CGT allowance of £12,300 this year, so you won't pay any tax unless you make more than this much profit when you sell them. 

I have a GIA that I am using while I wait for the next tax year's ISA allowance to arrive. Roll on April 6th!

@tacpot12 which platform do you use for your GIA if I can ask?

eskbanker

chucknorris said:

The first £2,000 of dividend income which is tax free, and also the savings allowance too.

Perhaps pedantic but the first £2K of dividend income isn't actually 'tax-free' as such - it's taxable income that happens to be taxed at 0%, and the same applies to the savings 'allowance'.  For most that doesn't result in any appreciable difference but for those close to tax thresholds these can give rise to more tax....

Thrugelmir

Plenty of opportunities exist using a GIA. Few people utilise their annual CGT allowance for example. 

chucknorris

eskbanker said:

chucknorris said:

The first £2,000 of dividend income which is tax free, and also the savings allowance too.

Perhaps pedantic but the first £2K of dividend income isn't actually 'tax-free' as such - it's taxable income that happens to be taxed at 0%, and the same applies to the savings 'allowance'.  For most that doesn't result in any appreciable difference but for those close to tax thresholds these can give rise to more tax....

I know, but to save many more posters pointing the same thing out, I have edited my post.  

billy2shots

Don't forget as well as CGT to pay on any profit when selling/switching funds, there is also income tax to pay on any dividends/income generated by your holdings.

Even if you pick accumulation investments that invest the dividends automatically you still need to work out any income tax due.
In this scenario it's actually far easier to have the income version of certain holdings as it makes the calculation  easier. 

ColdIron

billy2shots said:

In this scenario it's actually far easier to have the income version of certain holdings as it makes the calculation  easier. 

Although you will swap a dividend calculation for an equalisation calculation

solidpro

Let's say (total theory, of course) you have a GIA with £100,000 invested and it makes exactly 12.3% increase in value - £12,300 in Y1 in profit and then a little less % increase/profit again in Y2 but the net result of the total profit in Y2 is another £12,300. Is the net result in cashing in that investment £0 tax or CG on the £24,600 total profit?

In other words, is the CG calculated and reset annually or only paid when you 'cash in' the investment - perhaps after 10 years?