ISAs - Leave in Cash? Or move to S&S?

af1963

If you're in a position where neither of you is paying any income tax, or only very little, on the savings interest, I don't think it matters much in the short term.  Shifting some of the non-ISA investments into dividend-paying shares outside an ISA wrapper could generate up to another £1k each of untaxed income by using the dividend allowance.  

If you invest in shares outside the ISA and make gains, you'll have CGT to consider. The annual allowance for that is now pretty small so if you went that way, you might need to keep an eye on it and "bank" any gains each year to make use of the CGT allowance, which can't be carried over to later years.  Doing the investment inside the ISA avoids that ( and also avoids the need to track all your gains and losses for tax purposes.)

You may also get different interest rates on your ISA and non-ISA savings.  Other things being equal, you'd hold onto the one that delivers the best return.

masonic

It's probably worth seeing what is in store for the cash ISA allowance before transferring a large portion of your cash ISAs to S&S ISAs. It might be worthwhile retaining more in cash ISAs in the short term and focus on building S&S ISAs from your other savings if you will be unable to freely transfer between the two types of ISA in the future. But a move into S&S will generally give you the best chance of your money lasting over the long term, as interest on cash will tend to just about keep up with inflation, which is not ideal when you want to use that interest as a source of income.

An alternative option to consider for your S&S ISA is iWeb, where you'll be charged nothing for holding the account, just a £5 fee for each trade. Several of us hold S&S ISAs with iWeb and can get away with paying next to nothing in fees while our investments just sit there doing their thing. I also quite like the idea of holding different accounts with different providers, in case of IT issues or platform failure. AJ Bell is very good for its SIPP, but not quite as good a deal for its S&S ISA.

jimjames

What_time_is_it said:

af1963 said:

In the longer term, getting a chunk of the £200k savings into some kind of ISA or SIPP would be helpful , for a later time when you're getting DB pension and state pension, so any interest is liable to be taxed.

Checked your state pension forecasts ?  Might need some topups if you are still under 50 and no longer working.

Thanks for the advice. 

Would you recommend transferring our cash ISAs into stocks and shares ISAs? Or would it better to leave them where they are and use some of our existing non-ISA savings to invest in some kind of investment product instead?

I would certainly move cash ISAs to S&S ISAs in preference to holding investments outside an ISA to reduce impact of CGT and income tax long term.

What_time_is_it

jimjames said:

What_time_is_it said:

af1963 said:

In the longer term, getting a chunk of the £200k savings into some kind of ISA or SIPP would be helpful , for a later time when you're getting DB pension and state pension, so any interest is liable to be taxed.

Checked your state pension forecasts ?  Might need some topups if you are still under 50 and no longer working.

Thanks for the advice. 

Would you recommend transferring our cash ISAs into stocks and shares ISAs? Or would it better to leave them where they are and use some of our existing non-ISA savings to invest in some kind of investment product instead?

I would certainly move cash ISAs to S&S ISAs in preference to holding investments outside an ISA to reduce impact of CGT and income tax long term.

Thanks. That aligns with what I was thinking. I don’t know anyone with experience of doing this so it’s super useful to hear from people who have had experience and/or have some insight into this stuff.

jimjames

What_time_is_it said:

jimjames said:

What_time_is_it said:

af1963 said:

In the longer term, getting a chunk of the £200k savings into some kind of ISA or SIPP would be helpful , for a later time when you're getting DB pension and state pension, so any interest is liable to be taxed.

Checked your state pension forecasts ?  Might need some topups if you are still under 50 and no longer working.

Thanks for the advice. 

Would you recommend transferring our cash ISAs into stocks and shares ISAs? Or would it better to leave them where they are and use some of our existing non-ISA savings to invest in some kind of investment product instead?

I would certainly move cash ISAs to S&S ISAs in preference to holding investments outside an ISA to reduce impact of CGT and income tax long term.

Thanks. That aligns with what I was thinking. I don’t know anyone with experience of doing this so it’s super useful to hear from people who have had experience and/or have some insight into this stuff.

With savings you only need to worry about possible income tax, with investments you could have that as well as tax on the gains and with £160k of investments that could easily dwarf the annual allowance. In addition you'd need to keep track of every transaction for recording future tax liability. ISA removes all of that.