ISA mistake - opened a General Investment Account.

James19791

I opened what I thought was an Stocks and shares ISA with Nutmeg in October 2022 (in their Smart Alpha managed portfolio).  I should have payed more attention but I have only just realised that the account is not an ISA but a General Investment Account.  So i'm please seeking advice on what to do.  I havent had any other ISA's since 2022 so I was eligable.

In the 3 years I have contributed 55k and my investment stands at 74k so a 19k gain.  I most recently put in 15k around a month or 2 ago (this financial year).

So being a General Investment Account do taxes may apply if I sell?  What is the best way to proceed from here?  Is it better to keep the funds with Nutmeg and move funds over the next few years to an ISA (moving 20k per financial year) with them.  Is this better than moving it 20k per year to anohter platform ISA?

I was planning on moving from Nutmeg to a lower fee investment fund on another platform - this is how I came to realise my mistake.

I earn around 56K/year income.

Thank you!    

Keep_pedalling

CGT will be payable on any sales that include a gain in excess of £3000 (assuming you have not already used up your annual allowance). You have made an average gain of 38% so selling more than £7895 in a financial year will take you into CGT territory. 

vacheron

Open up a Nutmeg ISA (or any other S&S ISA you prefer) and sell just enough shares to not exceed your £3000 annual CGT allowance (as @Keep_pedalling says, this assumes you haven't already incurred any other capital gains in 2024-25), or as @dunstonh has added below, that Nutmeg haven't incurred any on your behalf!

Move the cash into your S&S ISA and purchase whichever investments you require.

If you have sufficient savings, you can buy the investments in your ISA on the same day in order to limit time out of the market while your GIA sale clears, then replace the savings from the GIA sale proceeds.

You can then do the same again after April the 6th.

You can also move shares tax free between spouses, so if you are married, you can gift half to you spouse and they can sell them for you using their CGT allowance, they can then send the cash back to you to put back in your ISA.

This should release quite a chunk of the gains over the next 6 months with no tax to pay. 

dunstonh

So being a General Investment Account do taxes may apply if I sell?

Three taxes apply to GIA potentially. Dividend tax.  Tax on interest and capital gains tax.

I was planning on moving from Nutmeg to a lower fee investment fund on another platform - this is how I came to realise my mistake.

That is out of the window now.  You are effectively tied to Nutmeg if you dont want to pay the CGT.   

You also need to check any portfolio adjustments that Nutmeg have carried out.   Any sales are classified as disposals for CGT purposes.  You may have already triggered a CGT liability without realising it.

NorthYorkie

Have you declared any interest and dividends on your self assessment returns for 2022-23 and 2023-24?

FrugaiMacDugal

Is Bed&Isa an option?

EthicsGradient

dunstonh said:

I was planning on moving from Nutmeg to a lower fee investment fund on another platform - this is how I came to realise my mistake.

That is out of the window now.  You are effectively tied to Nutmeg if you dont want to pay the CGT.   

What are you saying here? If a transfer can be done in specie, you remain the beneficial owner throughout, so it shouldn't count as a sale. See eg 
In-specie transfer to change portfolio custodian -Tax Forum :: Free Tax Advice
"For a number of reasons I would like to transfer the custody and management of the portfolio from the current bank across to another institution, but I don't want to sell any of the funds.

I have been told that if I request an "in-specie" transfer of my holdings then this should not result in any sales and therefore no capital gains will be made as far as HMRC is concerned.

Is this correct? Is there anything else I should pay attention to as I really do not want this transfer to be considered a sale and result in CGT."
Reply:
"Yes, it is fine.

You remain the beneficial owner of the investments throughout so there is no disposal which could attract tax."

wmb194

EthicsGradient said:

dunstonh said:

I was planning on moving from Nutmeg to a lower fee investment fund on another platform - this is how I came to realise my mistake.

That is out of the window now.  You are effectively tied to Nutmeg if you dont want to pay the CGT.   

What are you saying here? If a transfer can be done in specie, you remain the beneficial owner throughout, so it shouldn't count as a sale. See eg 
In-specie transfer to change portfolio custodian -Tax Forum :: Free Tax Advice
"For a number of reasons I would like to transfer the custody and management of the portfolio from the current bank across to another institution, but I don't want to sell any of the funds.

I have been told that if I request an "in-specie" transfer of my holdings then this should not result in any sales and therefore no capital gains will be made as far as HMRC is concerned.

Is this correct? Is there anything else I should pay attention to as I really do not want this transfer to be considered a sale and result in CGT."
Reply:
"Yes, it is fine.

You remain the beneficial owner of the investments throughout so there is no disposal which could attract tax."

In specie transfers don't trigger a CGT event - you haven't sold anything -  but in my experience robo investment platforms refuse to do them and instead sell everything and then transfer cash. Perhaps this is what Dunston is thinking of in regards to Nutmeg.

FrugaiMacDugal

If you do an in specie transfer it will go into a GIA with new provider.

wmb194

FrugaiMacDugal said:

If you do an in specie transfer it will go into a GIA with new provider.

See my post above; you need to be certain that Nutmeg will do this.

ColdIron

FrugaiMacDugal said:

Is Bed&Isa an option?

That would require a disposal