Investing 300k GBP in active GIA

dunstonh

Using a single fund in a GIA is likely to increase CGT compared to using single country/region funds.    A single fund gives you no ability to decide where your sales can be made.   Whereas breaking it into single sector funds means you can pick and choose your disposals which will make it easier to use the CGT allowance and bed & ISA each year.  

Alexland

aroominyork said:

Why do you suggest an Acc fund? In a GIA an Inc version is much easier for recording dividends and capital gain.

Yes easier but provided the fund has adequate reporting it can be done either way and an acc fund would incur lower trade costs.

dunstonh said:

Using a single fund in a GIA is likely to increase CGT compared to using single country/region funds.    A single fund gives you no ability to decide where your sales can be made.   Whereas breaking it into single sector funds means you can pick and choose your disposals which will make it easier to use the CGT allowance and bed & ISA each year.  

Sure but then you are incurring the extra costs of managing a portfolio and now the allowance is so small most of the gain is likely to be taxable either way. I guess the OP could gradually move enough of one global tracker into another global tracker each tax year to use their allowance.

EthicsGradient

Alexland said:

aroominyork said:

Why do you suggest an Acc fund? In a GIA an Inc version is much easier for recording dividends and capital gain.

Yes easier but provided the fund has adequate reporting it can be done either way and an acc fund would incur lower trade costs.

dunstonh said:

Using a single fund in a GIA is likely to increase CGT compared to using single country/region funds.    A single fund gives you no ability to decide where your sales can be made.   Whereas breaking it into single sector funds means you can pick and choose your disposals which will make it easier to use the CGT allowance and bed & ISA each year.  

Sure but then you are incurring the extra costs of managing a portfolio and now the allowance is so small most of the gain is likely to be taxable either way. I guess the OP could gradually move enough of one global tracker into another global tracker each tax year to use their allowance.

Remember that the OP wants to move £20k per year into an ISA. The income gets them some of that £20k, without any trading costs at all. Using an accumulating fund would mean bigger sales, with higher trading costs.

Alexland

EthicsGradient said:

Remember that the OP wants to move £20k per year into an ISA. The income gets them some of that £20k, without any trading costs at all. Using an accumulating fund would mean bigger sales, with higher trading costs.

I don't know any platforms that charge more to trade higher quantities of fund units. Acc or inc is a preference thing I doubt it would matter much either way but my gut feel is Acc would be a bit cheaper and minimise the time the income is uninvested with just a sale and ISA contribution at the start of each tax year.

Bostonerimus1

EthicsGradient said:

Bostonerimus1 said:

Put it in a low cost global equity fund and move 20k each year into an ISA. No need for active management.

That's good for simplicity and overall fund performance; there might be ways of saving a bit of tax (and perhaps management fees) by using a mix of regional index funds, and then selectively Bed-and-ISA-ing a part of them each year according to what is tax-efficient (using the max £3k CG allowance every year, if possible) to fund the 20k (after using any distributions as part of the ISA contribution). But this involves more DIY.

I’m not claiming that my solution will be optimal, just that it will be good enough for most people and easy to implement.

InvestSquirrel

Thanks all for your suggestions. I'm going to have a think about it and maybe come back with some more follow up questions! Thank you for your advice so far. 

EthicsGradient

Alexland said:

EthicsGradient said:

Remember that the OP wants to move £20k per year into an ISA. The income gets them some of that £20k, without any trading costs at all. Using an accumulating fund would mean bigger sales, with higher trading costs.

I don't know any platforms that charge more to trade higher quantities of fund units. Acc or inc is a preference thing I doubt it would matter much either way but my gut feel is Acc would be a bit cheaper and minimise the time the income is uninvested with just a sale and ISA contribution at the start of each tax year.

There's a spread on trades of ETFs, so higher amounts traded means higher costs. "Gut feel" doesn't convince me. And using accumulating funds cuts down the ability to choose the fund to sell to optimise CGT liability, because it changes the cost basis of a fund whether you like it or not. Time uninvested might be a point, though.

Alexland

EthicsGradient said:
There's a spread on trades of ETFs, so higher amounts traded means higher costs. "Gut feel" doesn't convince me. And using accumulating funds cuts down the ability to choose the fund to sell to optimise CGT liability, because it changes the cost basis of a fund whether you like it or not. Time uninvested might be a point, though.

Yes I was talking about funds not ETFs where I have sometimes had to split orders to get a reasonable unit price. The CGT allowance is now so low at £3k that it's unlikely any optimisation is going to make a difference on £300k once it gets accumulating.

flopsy1973

EthicsGradient said:

Bostonerimus1 said:

Put it in a low cost global equity fund and move 20k each year into an ISA. No need for active management.

That's good for simplicity and overall fund performance; there might be ways of saving a bit of tax (and perhaps management fees) by using a mix of regional index funds, and then selectively Bed-and-ISA-ing a part of them each year according to what is tax-efficient (using the max £3k CG allowance every year, if possible) to fund the 20k (after using any distributions as part of the ISA contribution). But this involves more DIY.

I'm reading this post with interest as I am in similar position with 400k and wondering how to tackle the tax implications. What distributions are you referring to above? So for reporting would include or acc units be easier as there seems to be bit of conflict here thanks

Alexland

flopsy1973 said:

I'm reading this post with interest as I am in similar position with 400k and wondering how to tackle the tax implications. What distributions are you referring to above? So for reporting would include or acc units be easier as there seems to be bit of conflict here thanks

Basically if you hold an income fund that fully distributes the income it gets from the underlying investments then it's pretty obvious from your platform cash history how much income you have received for income tax purposes and when you sell units it's pretty obvious what capital gain you have made by comparing the sale price with the original purchase price for the units you have sold. The downside is you get regular income you might not want in which case you then have to reinvest it with time out the market, trade fees, etc. It can then get complicated as the cost of the units at reinvestment will be different to the cost of the original units but maybe you can get around this by transferring the income into the S&S ISA rather than reinvesting in the GIA.
Or you can get an accumulating fund that retains the income and then use the fund manager's published data on how much income was generated to maintain a spreadsheet of how much income per unit occurred within the fund and calculate the capital gain by discounting the income declared from the sale price before comparing it to the original purchase price.
My plan to avoid all this complexity is just to run an unnecessarily large mortgage so I have somewhere to dump lump sums without getting into an annual bed & isa situation.