Investing in Self-Select ISA vs iShares ISA

hobbesandco

Hello,

I'm hoping someone can help me with my query. I am currently planning my own investments and my partner's. Sorry if I'm going on and on here but I could do with some much needed advice.

Here are our current investments:

1. Myself - FTSE100 tracker in a mini stocks and shares ISA wrapper from 2003,2004 and current tax years AND mini cash ISAs in 2004,2005 tax years
2. Partner - FTSE All-share tracker in a mini stocks and shares ISA wrapper in 2004 but not current tax year yet AND mini cash ISAs in 2004, 2005 tax years

My partner would like to invest additional 8k+ this year. His alternatives are:

1. Invest 4k in a mini iShares ISA (like FTSE/Xinhua tracker)
AND Invest 4k (selecting stocks himself including US shares) outside an ISA wrapper
2. OR Invest 4k in a self-select ISA AND invest additional 4k in an iSHARES tracker but outside an ISA wrapper

The reason I'm asking is because I've had a look at online brokers such as Hoodless Brennan and SquareGain and annual management charges for self-select ISAs are £50 and £25 respectively PLUS dealing charges PLUS transfer fees but if my partner invests in the iShares ISA he won't have to pay the annual managent fee. Logically it would be cheaper to have my partner invest his iShares in an ISA wrapper and any shares he buys directly outside of the ISA wrapper. Am I right to assume this? Also, I realise that capital gains tax is not taxed within an ISA but is this covered if you go over the allowance of 8k per year anyways or is any amount of capital gains tax untaxed in ISAs? Thanks for any advice...

deemy2004

In an Shares ISA, any amount of capital gains is NOT taxed.. and does not count towards your annual CGT allowance.

dunstonh

the dividend payments would also be exempt from any higher rate tax, if applicable. If the tax saved is more than the charges then thats good.

A question, tracker funds are cheap but putting all your eggs in one basket is the old fashioned way of investing. Any reason why you have limited yourself to a tracker (or arey the multiple sector trackers)? Especially as UK trackers are not the value they used to be.

EdInvestor

Hi hobbesandco

Have a look at a Halifax Sharebuilder account for the purchase of the shares outside the ISA, very cheap.

Just to clarify, there is no tax on dividends outside an ISA for basic rate taxpayers, higher rate pay 25%. Capital gains are subject to tax if over the annual allowance (8.5k at the moment IIRC).

cheerfulcat

hobbesandco wrote:

My partner would like to invest additional 8k+ this year. His alternatives are:

1. Invest 4k in a mini iShares ISA (like FTSE/Xinhua tracker)
AND Invest 4k (selecting stocks himself including US shares) outside an ISA wrapper
2. OR Invest 4k in a self-select ISA AND invest additional 4k in an iSHARES tracker but outside an ISA wrapper

The reason I'm asking is because I've had a look at online brokers such as Hoodless Brennan and SquareGain and annual management charges for self-select ISAs are £50 and £25 respectively PLUS dealing charges PLUS transfer fees but if my partner invests in the iShares ISA he won't have to pay the annual managent fee. Logically it would be cheaper to have my partner invest his iShares in an ISA wrapper and any shares he buys directly outside of the ISA wrapper. Am I right to assume this?

Hi,

I think that squaregain *do* levy the £25 pa ISA charge for holding the iplan though I admit that they could be a little clearer in their wording ( "You pay no initial fees to set up iPlan, no purchase commissions, no stamp duty and the annual charges on the funds are low, between 0.35% and 0.5% depending on the fund. We charge only a flat annual fee of £25 for your Squaregain self-select ISA or PEP. " ).

Also, I realise that capital gains tax is not taxed within an ISA but is this covered if you go over the allowance of 8k per year anyways or is any amount of capital gains tax untaxed in ISAs? Thanks for any advice.

Any gains, no matter how large :-), are free of CGT in an ISA for now.

How to decide which investment to put in the ISA wrapper? Well, your partner could use it for the investments which likely to be changed most often, thus saving a lot of hassle with record keeping, matching purchases to sales and so on which is required with investments held outside of a tax wrapper. So probably the shares, unless he intends to play about with the ETFs.

HTH

Cheerfulcat