Dividend Income Tax - Should we 'Bed to ISA' / CGT & Stamp Costs?

Billinho

Hi Forum,
Bit confused on this one as whilst I consider myself pretty financially savvy, I don't hold shares outside of an ISA and as such am a bit lost.

My mother has three holdings in large FTSE100 listed companies which she inherited from her parents prior to 1980.  She was holding these part for sentimental value, and also that they have grown to a level where she receives a modest amount of dividend income per year - around £800.
Company 'A' is the largest of the holdings with a market valuation of circa £15000, and provides approximately 50% of the total dividend income she receives.

As a basic rate tax payer she will now be taxed 8.75% on dividends over £500 in this current tax year (and presumably henceforth as I can't imagine any government is going to up this threshold for the foreseeable).  So around £30 a year.

I had wondered if we should bed-to-ISA the holdings in Company A - but I am wondering if the saving of Dividend tax is really worth it, as it looks like she'd need to pay 0.5% on the cost of the buying the shares (about £75) but also CGT -  bearing in mind that the shares would have been worth a fair amount 45+ years ago I'm not sure how to work out the liability - but seems that this could run into high three figures.
That being the case then my second question would be on whether she could gift (as an inheritance) her portfolio to her grandchild, or when she dies would that mark a 'chargeable event' for which we'd need to pay the CGT anyway?

Thanks 

wmb194

Billinho said:

Hi Forum,
Bit confused on this one as whilst I consider myself pretty financially savvy, I don't hold shares outside of an ISA and as such am a bit lost.

My mother has three holdings in large FTSE100 listed companies which she inherited from her parents prior to 1980.  She was holding these part for sentimental value, and also that they have grown to a level where she receives a modest amount of dividend income per year - around £800.
Company 'A' is the largest of the holdings with a market valuation of circa £15000, and provides approximately 50% of the total dividend income she receives.

As a basic rate tax payer she will now be taxed 8.75% on dividends over £500 in this current tax year (and presumably henceforth as I can't imagine any government is going to up this threshold for the foreseeable).  So around £30 a year.

I had wondered if we should bed-to-ISA the holdings in Company A - but I am wondering if the saving of Dividend tax is really worth it, as it looks like she'd need to pay 0.5% on the cost of the buying the shares (about £75) but also CGT -  bearing in mind that the shares would have been worth a fair amount 45+ years ago I'm not sure how to work out the liability - but seems that this could run into high three figures.
That being the case then my second question would be on whether she could gift (as an inheritance) her portfolio to her grandchild, or when she dies would that mark a 'chargeable event' for which we'd need to pay the CGT anyway?

Thanks 

Which company(ies) is it? Not all London listed companies attract stamp duty. You also need to consider buying and selling commissions and what you'd lose on the bid-offer spread, although with most FTSE100 companies this shouldn't be very much as they are usually quite close to one another.

IIRC the acquisition cost will be that at the time of transfer from the parent's estate and gifting is a chargeable event, it's only tax-free when the gift is between spouses or to a charity.

https://www.gov.uk/capital-gains-tax/gifts

Billinho

Thanks re: query over gifting/inheriting the shares.

Definitely Stamp applicable companies.  Doing an execution only trade through broker should be cheap enough - I think the decision on whether to do this is probably going to be on the CGT liability on the sale side.