ISA mistake - opened a General Investment Account.

James19791

NorthYorkie said:

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

I havent done any tax returns.  I thought I had an ISA.

FrugaiMacDugal

ColdIron said:

FrugaiMacDugal said:

Is Bed&Isa an option?

That would require a disposal

Yes, and potential CGT, depending on amount sold.

jimjames

FrugaiMacDugal said:

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

I assume you can't do in specie as Nutmeg funds are only available to their platform

dunstonh

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."

Nutmeg is not a platform but a robo. Most robos do not allow in-specie transfers unless they have an option for self-select, and you are using that option and not one of their model portfolios.  I haven't checked Nutmeg so if they do it then fair enough. Just most don't.

If they do support in-specie transfer then the OP would need to ensure a full transaction history is retained on file for the period it was at Nutmeg.

James19791

Keep_pedalling said:

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. 

I havent used any CGT on anything else so I have the allowance.  Can I ask please how the £7895 figure is calculated?   Are you saying I can move up to £7895 before triggering CGT?

How do they calculate CGT due if you sell a portion of the pot?  As the growth is 38%, is 38% of the chunk liable for the tax? (ie if its a 20k chunk then £7,600 is liable)? 

Im thinking it may be better in the long run to move £20k per year into an ISA and pay the CGT because it will take me 10 years at current value to move the whole 72K (in 7-8k chunks) over during which time the pot would have grown and I wont be able to keep up.  Does this make sense or have I got this wrong - that over the long term it would save money by paying some CGT now/yearly for 3 or so years just to get it into tax free (ISA) status?

Im not that bothered about changing providers - it was my origional intention -  just want to get as best a solution as I can.

I am not married.

Thanks

dunstonh

I havent used any CGT on anything else so I have the allowance.  Can I ask please how the £7895 figure is calculated?   Are you saying I can move up to £7895 before triggering CGT?

Have you checked your transaction history to see if any disposals have been made over the years?    Robos typically trade on their in-house portfolios.   Any fund they have sold since you have opened this account is classed as a disposal for CGT purposes.      

It's not possible to know if £7895 is accurate.  It was a rough estimate based on the information you provided at the time.    If there have been trades through reblancing and portfolio adjustments, then the figure would be further away from that.

How do they calculate CGT due if you sell a portion of the pot?  As the growth is 38%, is 38% of the chunk liable for the tax? (ie if its a 20k chunk then £7,600 is liable)? 

They do not.   You, your adviser or your accountant calculate it and if you go over the CGT allowance, you submit the computation to HMRC online.

In quick and dirty terms, its the gain minus purchase/sale costs minus available CGT allowance.  That is added to your income to see how much falls in the basic rate band or higher band and you are taxed at the appropriate rate.

Im thinking it may be better in the long run to move £20k per year into an ISA and pay the CGT because it will take me 10 years at current value to move the whole 72K (in 7-8k chunks) over during which time the pot would have grown and I wont be able to keep up.  Does this make sense or have I got this wrong 

Historically, CGT is increased under Labour and reduced under Conservatives.   It's a Laffer curve tax.  

Many pepole would use the current CGT allowance, and maybe enough to stay on the lower CGT rate, but defer any more until later in the expectation that CGT allowances or the tax rate improve in the future.  It's a cycle that has been done many times over the generations.   

You should be able to calculate how much you need to sell each year using a reasonable assumption for growth that sees a gradual reduction in the value whilst maximising the annual CGT allowance and paying a small amount of CGT.  Stockmarket crashes happen around 1 in 4 years.  So selling more after a large drop could help assuming you would invest it immediatly (in alternative assets - you cant use the same ones immediately after the sale)

QrizB

I don't know anything about Nutmeg but do they issue an annual statement with details of sales and gains? Or am I expecting too much?

James19791

QrizB said:

I don't know anything about Nutmeg but do they issue an annual statement with details of sales and gains? Or am I expecting too much?

I've just checked and there are tax summeries.  It looks like I stayed below the £3K CGT allowance in previous financial years.  This situation seems very slopy of me I know, but I was 100% sure I had an ISA.  I even timed my contributions for max 20k/year!  It never even occured to me that it might not be an ISA.

dunstonh

James19791 said:

QrizB said:

I don't know anything about Nutmeg but do they issue an annual statement with details of sales and gains? Or am I expecting too much?

I've just checked and there are tax summeries.  It looks like I stayed below the £3K CGT allowance in previous financial years.  This situation seems very slopy of me I know, but I was 100% sure I had an ISA.  I even timed my contributions for max 20k/year!  It never even occured to me that it might not be an ISA.

If they have traded over those years, as mentioned earlier, then a section 104 holding is likely.  So, when calculating your CGT, you will have to have the purchase dates, sales dates and amounts.  hence the need for the transactions list covering sales and purchases.

DRS1

Don't forget losses (I realise everyone on here only ever makes gains on their investments).

So if your portfolio includes share A which is showing a gain of £6k and share B which is showing a loss of £3k you can sell both share A and share B set off the £3k loss against the £6k gain and be covered by the £3k annual allowance.