Stocks & Shares ISA selling and converting to dividends

good afternoon all!
so I have a question that I can’t seem to find the answer to. 

lets say someone contributes £20K a year to a stocks and shares isa effectively maxing it out for 5 years. 
Then 20 years download the line it’s worth £250K. Only 100K contributed.

if this person then wants to move all of the stocks into say a dividend paying ETF. 
I understand the sale of the original stocks would not be taxed as it was all under the ISA allowance. 
But if the person then buys the dividend stocks are they limited to only buying £20K worth a year? 
Or because the £250K is already within the ISA can the new dividend stocks be purchased without any tax payments? 

As in when the original stocks are sold can the person go and spend the whole £250K on a dividend etf and get the quarterly dividends tax free? 

Or am I missing something somewhere?
I hope that explains the question enough

thank you 

Comments

  • Hoenir
    Hoenir Posts: 1,252
    First Post Name Dropper
    Forumite
    As long as the assets remain inside an ISA wrapper. There's no tax liability.  Any income generated can be  withdrawn tax free. The money inside the ISA can be invested in any thing that's acceptable to the HMRC. With assets freely traded. 
  • samcuddy123
    samcuddy123 Posts: 17
    First Anniversary First Post Combo Breaker
    Forumite
    Ah brilliant. So someone can sell all £250K of stock assets and buy £250K of dividends etf’s and then receive the dividends tax free as long as the money never leaves the ‘Isa wrapper’ 
    thanks 
  • samcuddy123
    samcuddy123 Posts: 17
    First Anniversary First Post Combo Breaker
    Forumite
    Ah brilliant. So someone can sell all £250K of stock assets and buy £250K of dividends etf’s and then receive the dividends tax free as long as the money never leaves the ‘Isa wrapper’ 
    thanks 
    Just in addition to this I mean “never leaves the ‘isa wrapper’” as when the original stock is being sold and dividend etf’s purchased. As I understand when dividends are withdrawn at the end they are leaving the isa wrapper. But that would not be taxed either.
  • jimjames
    jimjames Posts: 17,498
    Photogenic Name Dropper First Anniversary First Post
    Forumite
    Some people have over £1million in their ISAs. If they invest in a fund paying 4% then they would get £40,000 a year entirely tax free and outside any other allowances. So they could earn £50,000 elsewhere and get £90k a year in total but only pay lower rate tax on the £50k. That's quite an impressive way to build tax free money.
    Remember the saying: if it looks too good to be true it almost certainly is.
  • samcuddy123
    samcuddy123 Posts: 17
    First Anniversary First Post Combo Breaker
    Forumite
    Ah okay makes sense. Thanks for all the help it’s just some future planning. With example numbers. Don’t want to get 15 years down the line to find out I’ll get taxed if I want to swap my growth stocks to dividend stocks! 
  • Emmia
    Emmia Posts: 2,961
    First Anniversary First Post Photogenic Name Dropper
    Forumite
    Ah okay makes sense. Thanks for all the help it’s just some future planning. With example numbers. Don’t want to get 15 years down the line to find out I’ll get taxed if I want to swap my growth stocks to dividend stocks! 
    Tax rules can change though, so if you're not planning to do this for a while I'd re-check this before you do it.
  • dunstonh
    dunstonh Posts: 115,716
    Name Dropper First Anniversary Combo Breaker First Post
    Forumite
    And don't forget the pension wrapper is nearly always better than the ISA wrapper if you are looking to draw post age 57.        So, going heavy in ISA and not pension could cost you over a years worth of yield in the difference in tax handling.

    Yield has been out of fashion since 2008.   So, be careful you don't handicap your portfolio by focusing on yield before total return.  

    I am an Independent Financial Adviser (IFA). The comments I make are just my opinion and are for discussion purposes only. They are not financial advice and you should not treat them as such. If you feel an area discussed may be relevant to you, then please seek advice from an Independent Financial Adviser local to you.
Meet your Ambassadors

Categories

  • All Categories
  • 341.8K Banking & Borrowing
  • 249.7K Reduce Debt & Boost Income
  • 449.2K Spending & Discounts
  • 233.9K Work, Benefits & Business
  • 606.1K Mortgages, Homes & Bills
  • 172.5K Life & Family
  • 246.8K Travel & Transport
  • 1.5M Hobbies & Leisure
  • 15.8K Discuss & Feedback
  • 15.1K Coronavirus Support Boards