stocks & shares isa question

Sumselkb

Hi, I have a basic stocks & shares isa question. I don't understand how they work.

So if I buy shares at £12,000 and they rise to £20,000, so a gain of £8,000 profit, and I put them all in a stocks & shares isa, there's no capital gains tax. How do I then spend the money?

If I want to buy a car or go on a holiday or whatever am I supposed to do it all through my s&s isa? Or am I supposed to keep it in the stocks & shares isa for a certain period of time before sending it to my bank account and then using it?

I don't understand how it works at all.

MeteredOut

If you've already bought the shares outside of the S&S ISA, you can "Bed and ISA" - sell them outside the ISA, pay any CGT tax due (over £3K tax year limit), and then buy them again inside the S&S ISA. Any gain from that point on will be CGT free.

But if you buy the shares with cash already deposited in your S&S ISA, you can sell them in the S&S ISA at any time, then withdraw the money including any gains with no capital gains tax due. There are no time limits.

eskbanker

There's no CGT if the investments were purchased and sold within the ISA - once you've sold them then you can withdraw funds to your bank account to spend, as soon as the transaction has settled (a few days sometimes).

Note that it's rarely advisable for beginners to leap into buying shares - collective investments such as index funds will be a more typical first step.

SVaz

Be aware that to go from £12000 to £20000 will probably take 7-10 years without further investment, longer if the markets have a couple of big drops.
You might be lucky and average 10% a year growth on top of platform and fund fees but then again, maybe not. 

JGB1955

So if I buy shares at £12,000 and they rise to £20,000, so a gain of £8,000 profit, and I put them all in a stocks & shares isa,

NO - you put £12,000 cash into a S&S ISA and THEN buy shares...

mebu60

You need to open the S&S ISA first then deposit cash (up to £20k new money per tax year) then buy investments (suggest avoid individual shares). You can sell your holdings free of CGT any time and withdraw the cash from your S&S ISA to your nominated current bank account to do with as you wish. 

Sumselkb

Thanks for the replies.

I started paying into my company share save scheme in late 2022 and it will mature in December 2027.

I will have a total of £12,000 taken out of my wages, and when it reaches the maturity date I hope it will be worth somewhere around £20,000 (with the current share price it is just over £20,000)

So do I set up a new stocks and shares isa in November 2027, and the following month transfer the shares from the platform to the new stocks and shares isa? I was going to use a cash isa but that's no longer possible with the budget £12,000 limit.

Could I send some to a cash isa and some to a stocks and shares isa?

eskbanker

Sumselkb said:

Thanks for the replies.

I started paying into my company share save scheme in late 2022 and it will mature in December 2027.

I will have a total of £12,000 taken out of my wages, and when it reaches the maturity date I hope it will be worth somewhere around £20,000 (with the current share price it is just over £20,000)

So do I set up a new stocks and shares isa in November 2027, and the following month transfer the shares from the platform to the new stocks and shares isa? I was going to use a cash isa but that's no longer possible with the budget £12,000 limit.

Could I send some to a cash isa and some to a stocks and shares isa?

It depends what you want to achieve - you should have access to scheme documentation about your options on maturity, but they should include either transferring the shares directly into a S&S ISA or selling them.  Not sure where a cash ISA would fit into this, unless you want to sell some or all of the shares and then protect the proceeds from future taxation by using a cash ISA?

One thing's for sure, you have plenty of time to plan what you want to do, and there'll be another couple of budgets before then, so no need to rush into any decision just now!

jimjames

Sumselkb said:

If I want to buy a car or go on a holiday or whatever am I supposed to do it all through my s&s isa? Or am I supposed to keep it in the stocks & shares isa for a certain period of time before sending it to my bank account and then using it?

A S&S ISA is just like any other ISA - a wrapper than protects its contents from tax. You can't spend money directly from a cash ISA for a car or holiday, it has to be transferred to your bank account first so a S&S ISA is no different.

MeteredOut

Sumselkb said:

Thanks for the replies.

I started paying into my company share save scheme in late 2022 and it will mature in December 2027.

I will have a total of £12,000 taken out of my wages, and when it reaches the maturity date I hope it will be worth somewhere around £20,000 (with the current share price it is just over £20,000)

So do I set up a new stocks and shares isa in November 2027, and the following month transfer the shares from the platform to the new stocks and shares isa? I was going to use a cash isa but that's no longer possible with the budget £12,000 limit.

Could I send some to a cash isa and some to a stocks and shares isa?

This detail you've now provided is important as you should be able to transfer £20K of your shares into a S&S ISA without having to pay any tax so long as you do it within 90 days of maturity. You can then sell the shares from the S&S ISA free of any CGT and remove the cash if you so wish. Or leave the shares there and any future gains will be tax free.

https://www.gov.uk/tax-employee-share-schemes/transferring-your-shares-to-an-isa

Note only some S&S providers accept transfers from share save schemes.

You won't be able to send any shares to a cash ISA, but you should be able to transfer some to a S&S ISA, and sell others from your share save account. Those sold would be liable for CGT but you have a £3K allowance each tax year.

Check your share save scheme documentation on what options are available to you for transferring.

Sumselkb

Thanks for the replies.

So when my share save matures I can transfer the shares to a stocks and shares isa (but make sure that the ISA accepts the direct transfer of shares as not all isa providers offer this facility) and when they are inside the stocks and shares ISA I can then either just leave them or sell them and send the cash to my bank account immediately. Is that correct?

Another thing is that my annual salary is a little over £10,000, but with overtime it is usually around £12,000 to £13,000 a year. so if I have any money in a savings account then I can have £1,000 in savings interest and a further £5,000 with starter for savings? 

Keeping all the shares inside a stocks and shares isa seems risky as they can go down in value but the returns would be better long term I think if I have them for at least 10 years inside the s&s isa.

Things can still change a lot over the next couple of years with budget changes, changes in interest rates etc, but I have a clearer idea now of how a stocks and shares isa works and what to do. Thanks.