ETF in a GIA

MoneyMan01

InvesterJones said:

MoneyMan01 said:

In theory, could you invest, and then say at tax year end you made £499 in dividends, and/or your capital grew by £2,999, you could sell the profit, be within your allowances, and then start again the following tax year. Thus removing any tax implications, removing all requirement of admin work?

If you sold only the profit, then your capital gains would be a fraction of the allowance available, and there's no guarantee you'd make the same or less in a future year.

But in theory would save all the hassle of having to worry about ERI, UK based vs. not etc?

ColdIron

MoneyMan01 said:

InvesterJones said:

MoneyMan01 said:

I have so much reading to do. There seems to be about 15 things you need to be aware of if investing in an ETF via GIA.

What does everyone else do? What is the best way to invest? I appreciate there is leg work that is needed, which I am educating myself on. But, in the meantime, what investment options are there which comes with less hassle?

 Use ISA and SIPP to avoid having to hold anything close to threshold producing amounts of stocks in GIA. Hold gilts there instead.

Are there any other investment items that are less hassle in the interim, whilst I learn, that I can put my money?

A few days ago this poster posted this useful reply

ColdIron said:

Both ETFs and OEICs have issues

Investment Trusts are about as simple as it gets, no ERI, equalisation or retained dividends. Just simple capital gain and dividends (or interest). No index trackers however

MoneyMan01

Thanks. There is so much on my list that I am researching that this one slipped through the net. Will add to the list to read up on.

InvesterJones

MoneyMan01 said:

InvesterJones said:

MoneyMan01 said:

In theory, could you invest, and then say at tax year end you made £499 in dividends, and/or your capital grew by £2,999, you could sell the profit, be within your allowances, and then start again the following tax year. Thus removing any tax implications, removing all requirement of admin work?

If you sold only the profit, then your capital gains would be a fraction of the allowance available, and there's no guarantee you'd make the same or less in a future year.

But in theory would save all the hassle of having to worry about ERI, UK based vs. not etc?

I'm not sure. Possibly. Hassle wise certainly depends on the rest of your tax situation I expect and how much of the fund is in interest bearing investments. Even if no interest bearing investments, it doesn't take a lot of capital (by mortgage standards) to hit the dividend allowance for modestly yielding investments.

wmb194

MoneyMan01 said:

InvesterJones said:

MoneyMan01 said:

In theory, could you invest, and then say at tax year end you made £499 in dividends, and/or your capital grew by £2,999, you could sell the profit, be within your allowances, and then start again the following tax year. Thus removing any tax implications, removing all requirement of admin work?

If you sold only the profit, then your capital gains would be a fraction of the allowance available, and there's no guarantee you'd make the same or less in a future year.

But in theory would save all the hassle of having to worry about ERI, UK based vs. not etc?

ERI is classed as either a dividend or interest and it's earned if you own shares in an ETF on a particular date. This tactic will only save you the worry if you sell the ETF before the qualification date. So, no.

MoneyMan01

wmb194 said:

MoneyMan01 said:

InvesterJones said:

MoneyMan01 said:

In theory, could you invest, and then say at tax year end you made £499 in dividends, and/or your capital grew by £2,999, you could sell the profit, be within your allowances, and then start again the following tax year. Thus removing any tax implications, removing all requirement of admin work?

If you sold only the profit, then your capital gains would be a fraction of the allowance available, and there's no guarantee you'd make the same or less in a future year.

But in theory would save all the hassle of having to worry about ERI, UK based vs. not etc?

ERI is classed as either a dividend or interest and it's earned if you own shares in an ETF on a particular date. This tactic will only save you the worry if you sell the ETF before the qualification date. So, no.

Thank you once again for your clear, direct clarification. Genuinely. 

leosayer

GeoffTF said:

MoneyMan01 said:

So in short, it doesn't matter which ETF (Div v Acc) is used. Going with one over the other isn't going to lower the tax bill?

Unfortunately it can. It is a real minefield. There is no substitute for knowing the rules and working out the numbers. It is safest to avoid accumulating finds in a GIA.

Please would you advise why it is safest to avoid acc funds in a GIA.

gravel_2

leosayer said:

GeoffTF said:

MoneyMan01 said:

So in short, it doesn't matter which ETF (Div v Acc) is used. Going with one over the other isn't going to lower the tax bill?

Unfortunately it can. It is a real minefield. There is no substitute for knowing the rules and working out the numbers. It is safest to avoid accumulating finds in a GIA.

Please would you advise why it is safest to avoid acc funds in a GIA.

Don't buy Acc funds. Simple.

MoneyMan01

gravel_2 said:

leosayer said:

GeoffTF said:

MoneyMan01 said:

So in short, it doesn't matter which ETF (Div v Acc) is used. Going with one over the other isn't going to lower the tax bill?

Unfortunately it can. It is a real minefield. There is no substitute for knowing the rules and working out the numbers. It is safest to avoid accumulating finds in a GIA.

Please would you advise why it is safest to avoid acc funds in a GIA.

Don't buy Acc funds. Simple.

Why? Accumulating funds are good for compounding aren’t they? 

Or are you saying avoid them because it makes reporting tax on them more complicated? 

masonic

MoneyMan01 said:

gravel_2 said:

leosayer said:

GeoffTF said:

MoneyMan01 said:

So in short, it doesn't matter which ETF (Div v Acc) is used. Going with one over the other isn't going to lower the tax bill?

Unfortunately it can. It is a real minefield. There is no substitute for knowing the rules and working out the numbers. It is safest to avoid accumulating finds in a GIA.

Please would you advise why it is safest to avoid acc funds in a GIA.

Don't buy Acc funds. Simple.

Why? Accumulating funds are good for compounding aren’t they? 

Or are you saying avoid them because it makes reporting tax on them more complicated? 

Accumulating funds reinvest the income automatically so that you don't have to. But you will need to find out what that reinvested income was in order to declare it, and for CGT calculations further down the line. With ETFs (and other offshore funds), the excess reportable income means that you need to go looking whichever type you choose, so I don't think accumulating is more complicated in that scenario. The exception being the small number of ETFs that do a good job of distributing all of their income so that ERI is zero, though you always have to check.