Stocks & Shares: General Investment Account - Tax question

Darnhall123

ColdIron said:

PaulW63 said:

masonic said:

PaulW63 said:

masonic said:

It's unlikely you'd obtain any interest within your GIA unless holding cash or very low risk investments. Any interest would be taxable on the (notional) distribution date of the fund or when paid for a cash balance.

You are more likely to receive dividends, which are not taxed as interest, or capital gains, which are only taxed when you sell investments.

You should probably read up on these so you understand how they work and the rates of tax applicable.

Thanks for your reply. 

Maybe I’ve worded it incorrectly. (I’m changing my original post now)

I’m a complete beginner to S&S and only ever put my money into cash ISAs and general fixed interest savings accounts. 

I’m already seeing a few hundred pounds “gain” on my S&S original investment after a couple of months, so I was wondering if I’d be taxed yearly on any “gain” showing over the £500 yearly allowance for my tax band, even if I leave the money in the account year after year. 

As mentioned above, investments generate both income and capital gains. These are taxed differently. You need to be able to calculate the amount of each, so detailed records are required if investing outside of a S&S ISA or pension product. It is usually preferred to prioritise putting investments into an ISA both from a tax and record keeping perspective.

Dividends (including dividends received into accumulation funds) are taxed yearly, whereas capital gains are taxed at the point that you sell the investment. Since you've not stated what you've invested in, it is impossible to say how much of your overall growth would be taxed yearly.

My initial choices:

SPDR S&P 500 UCITS ETF

Disregarding the wisdom of this choice, ETFs are probably the most difficult things to deal with from a tax PoV. You will need to acquaint yourself with tax on ERI (Excess Reportable Income) as well as capital gains tax and (in the distributing version) tax on dividends

Hardly a wise choice for someone who is 'a complete novice and greener than green'. I know my way around unwrapped taxation and just won't use them outside an ISA/SIPP, life is too short. You would be well advised to find an open ended alternative ('fund'/OIEC/Unit Trust), there are many available

https://monevator.com/excess-reportable-income

Thank you for you reply and welcome advice. 

As I’ve just stated in another reply, I think I’ll stick to what I’m good at (and that doesn’t include S&S!!!) 🤣🤣🤣
I’ll prob leave what I’ve got in there for a year or two and see if my original investment has grown (or face planted!) 🫣

Cheers once again. 

TheTelltaleChart

PaulW63 said:

As I’ve just stated in another reply, I think I’ll stick to what I’m good at (and that doesn’t include S&S!!!) 🤣🤣🤣
I’ll prob leave what I’ve got in there for a year or two and see if my original investment has grown (or face planted!) 🫣

Might be worth considering selling 3 of your 4 choices, and putting it all in Vanguard Lifestrategy 80% Equity fund instead. Because that one is designed as an all-in-one investment for people who don't know a lot about investing, or who want to set it up and then forget about it; and the other 3 aren't.

Other all-in-one investments are available, and this one may or may not be suitable for you. It's more likely to be suitable if you'll leave it there for perhaps 10+ years, not just one or 2 (though just looking at it after a year or 2 is fine).

DiamondLil

Thank you for you reply and welcome advice. 

As I’ve just stated in another reply, I think I’ll stick to what I’m good at (and that doesn’t include S&S!!!) 🤣🤣🤣
I’ll prob leave what I’ve got in there for a year or two and see if my original investment has grown (or face planted!) 🫣

Cheers once again. 

This was me 30 odd years ago; just take your time, read everything you can find on investing in stocks and shares, and when you feel a little more confident, try monthly drip feeding into a decent fund, ETF or Investment Trust.

Reading up on here will give you lots of info. and I'm told Smarter Investing by Tim Hale is a good place to start too.

jimjames

PaulW63 said:

I’ve recently started investing monthly money into a S&S ‘general investment account’ with AJ Bell.

I also use (and max out), my annual ISA allowance.

This sounds like a big mistake to me. If you are investing in S&S then the best place for that is inside an ISA. Either move some of your cash ISA to S&S or leave enough space in your cash ISA so you can use that part of the allowance for S&S elsewhere. It makes no sense to faff around with GIA and the associated tax issues when you have the option of an ISA wrapper that will remove all of that hassle.

InvesterJones

jimjames said:

PaulW63 said:

I’ve recently started investing monthly money into a S&S ‘general investment account’ with AJ Bell.

I also use (and max out), my annual ISA allowance.

This sounds like a big mistake to me. If you are investing in S&S then the best place for that is inside an ISA. Either move some of your cash ISA to S&S or leave enough space in your cash ISA so you can use that part of the allowance for S&S elsewhere. It makes no sense to faff around with GIA and the associated tax issues when you have the option of an ISA wrapper that will remove all of that hassle.

IF the assumption is it's maxed out with cash, then I'd say it sounds more complex than it needs to be, but not necessarily a mistake if the dividend and capital gains allowances make sense to be used this way. Personally, however, I agree with you and tend to use my ISA wrapper for S&S and cash/gilts outside of it - partly gilts make sense, and partly banks report interest nice and cleanly to HRMC (for the most part) so I don't often have to do anything.

Darnhall123

jimjames said:

PaulW63 said:

I’ve recently started investing monthly money into a S&S ‘general investment account’ with AJ Bell.

I also use (and max out), my annual ISA allowance.

This sounds like a big mistake to me. If you are investing in S&S then the best place for that is inside an ISA. Either move some of your cash ISA to S&S or leave enough space in your cash ISA so you can use that part of the allowance for S&S elsewhere. It makes no sense to faff around with GIA and the associated tax issues when you have the option of an ISA wrapper that will remove all of that hassle.

I opened a 5year cash ISA with Shawbrook Bank 2 years ago on a decent 5.22% rate and currently maxing that out each year (I’ve just put another £20k in so now have around £62,500 entering tax year 3. Maybe I could’ve done better in a S&S ISA, but as you can see I have zero knowledge so happy to get a guaranteed 5.22 return.
i’m conscious of the 85k ‘insured’ limit so will only put 15k in next year if the Chancellor allows it and  the other 5k (maybe) in S&S. 
I’m grateful for all the advice given by people much more knowledgable than me, but will probably steer clear of investing serious amounts in a market I obviously have no knowledge in. 

NoMore

If this is for retirement, I would be using a pension before a GIA for this.

Darnhall123

NoMore said:

If this is for retirement, I would be using a pension before a GIA for this.

I get that and I do pile money into my pension. I just fancied giving S&S a go with a few grand, but don’t think I’ll be putting much more in. This thread has made me realise just how much I DONT know. 

dingling68

The forum is a great source of help and guidance and if you keep reading you will soon feel more confident in your choices and the best route to take from here 

dunstonh

PaulW63 said:

NoMore said:

If this is for retirement, I would be using a pension before a GIA for this.

I get that and I do pile money into my pension. I just fancied giving S&S a go with a few grand, but don’t think I’ll be putting much more in. This thread has made me realise just how much I DONT know. 

Why does wanting to give S&S a go with a few grand stop you using the pension wrapper?
You can access the same investments unwrapped as you can in an ISA wrapper, pension wrapper or investment bond (onshore/offshore) wrapper.