Tax

20122013

I want to hold both cash ISA and S&S ISA and would like to understand the tax implications.

 

is it better to use a maturing cash ISA to invest in S&S ISA or transfer the maturing cash ISA to another Cash ISA, and use cash to invest in S&S/ Funds which will be taxable when I sell. (I hope not to sell the S&S until I am running out of income ie on very low tax band).  

TadleyBaggie

20122013 said:

Funds which will be taxable when I sell

You lost me there. When you sell ISA S&S funds and withdraw, no tax is payable on the proceeds.

Dazed_and_C0nfused

20122013 said:

I want to hold both cash ISA and S&S ISA and would like to understand the tax implications.

 

is it better to use a maturing cash ISA to invest in S&S ISA or transfer the maturing cash ISA to another Cash ISA, and use cash to invest in S&S/ Funds which will be taxable when I sell. (I hope not to sell the S&S until I am running out of income ie on very low tax band).  

I think you have misunderstood the principle purpose of ISA's.

DRS1

I think you are confusing people by bringing ISAs into it.  They are income tax and CGT free.

What you are really asking is whether what you keep OUTSIDE the ISA should be cash in an interest bearing account or stocks and shares.

That really depends on your tax position.

For cash you don't need to worry about CGT and the interest earned might be covered by the £1k and £5K zero tax bands - though the £5k band may not be relevant depending on what your other income is.

For shares you will need to monitor capital gains but you have a £3k annual allowance and if you keep churning the investments each year you may be able to keep within that.  You also have a £500 dividend zero rate band which may cover any dividends you receive.  Even if it doesn't the tax rate for a basic rate taxpayer on dividends is only 8.75% instead of 20% on interest.

You may find that a mix and match approach works best - keeping the interest on cash savings within the £1k zero rate band and the capital gains on shares within the £3k allowance and dividends from those shares under £500.

Or you could just do what you like with the money and pay whatever tax is due when it is due.  They do say not to let the tax tail wag the dog.

20122013

DRS1 appreciate your time and understanding.