Clarification on Stocks and Shares ISA

MRLX69

Okay, I've been looking at a few but would like to clarify a few things first...

Shares in ISAs are only protected against CGT and NOT dividends tax right?

Also - there's no management fee on self selected ISAs, or is it different for each provider?

Lets say I have a S&S ISA and I invest £7200 in stock X. If the value raises, can I sell and use the >£7200 to buy other shares? Or is it that if I sell it, the money officially comes out of the ISA and I won't be able to invest via the ISA until next year?


Thanks people!!

david78

Dividends are taxed at 10%; there is nothing more to pay if you are a higher rate tax payer.

There is no Capital Gains tax to pay on gains (but also you can't offset losses against gains).

Fees vary from provider to provider. Generally, if you are buying funds, the provider will get some commission from the sale (and some renewal income), so you will pay less to "deal". If you buy shares then there may be a high dealing fee and no annual fee or smaller fees and annual annual fee.

Once you have invested money, say £7200, if you chose to cash in, say, £2500 of this, the cash stays in the ISA pending your instructions. You can choose to invest it in something else or withdraw it.

MRLX69

david78 wrote: »

Dividends are taxed at 10%; there is nothing more to pay if you are a higher rate tax payer.

There is no Capital Gains tax to pay on gains (but also you can't offset losses against gains).

Fees vary from provider to provider. Generally, if you are buying funds, the provider will get some commission from the sale (and some renewal income), so you will pay less to "deal". If you buy shares then there may be a high dealing fee and no annual fee or smaller fees and annual annual fee.

Once you have invested money, say £7200, if you chose to cash in, say, £2500 of this, the cash stays in the ISA pending your instructions. You can choose to invest it in something else or withdraw it.

Thanks David! - would like to know, what exactly are the advantages of having your S&S ISA as to having a share dealing account???

The thing is - I want to be more adventurous and start playing around with the stock market. I've yet to invest in an ISA for this year. I don't know what would be more advantageous, having a S&S ISA or just a cash ISA?

If I go for a cash ISA, I would open a separate share dealing account. But I don't want to find out later on that I should have done it through an ISA....

Thanks!!

debbie42

MRLX69 wrote: »

The thing is - I want to be more adventurous and start playing around with the stock market. I've yet to invest in an ISA for this year. I don't know what would be more advantageous, having a S&S ISA or just a cash ISA?

If I go for a cash ISA, I would open a separate share dealing account. But I don't want to find out later on that I should have done it through an ISA....

I have both cash + s&s: at the moment I'm splitting it half and half. The regulations have changed this year, so you can transfer from a cash ISA to a S&S isa (not the other way, though).

I pay £25 pa (with Selftrade) to keep my shares in an ISA wrapper. I don't really need to do that at the moment as I don't fill out a tax return, or pay tax on my earnings. However, my circumstances may change in the future and to me, it's a small overhead to pay against the value of my portfolio.

cheerfulcat

MRLX69 wrote: »

would like to know, what exactly are the advantages of having your S&S ISA as to having a share dealing account???

No CGT, no higher rate tax to pay on dividends, no need to declare dividend income, no need to declare disposals when the total is greater than 4* the annual exempt amount.

MRLX69

cheerfulcat wrote: »

No CGT, no higher rate tax to pay on dividends, no need to declare dividend income, no need to declare disposals when the total is greater than 4* the annual exempt amount.

What do you mean by no need to declare disposals? - do you mean selling shares?
That's another thing - where does the dividends go? - back in the S&S ISA? As cash?

So if I'm a higher rate tax payer, I'll be paying 40% on my dividends? - But in an ISA it'll be only 20%?

Sorry for so many questions..... thanks people!!!!

dunstonh

What do you mean by no need to declare disposals? - do you mean selling shares?

Correct.

hat's another thing - where does the dividends go? - back in the S&S ISA? As cash?

They will go into the cash fund held in the ISA if you say that is the option you want or they will pay out to your bank account if you choose that option. Money paid out cannot be reinvested without using your ISA allowance.

So if I'm a higher rate tax payer, I'll be paying 40% on my dividends? - But in an ISA it'll be only 20%?

Not quite as you have the tax credit. However, you will be avoiding any further liability to income tax by using the ISA.

MRLX69

debbie42 wrote: »

I have both cash + s&s: at the moment I'm splitting it half and half. The regulations have changed this year, so you can transfer from a cash ISA to a S&S isa (not the other way, though).

I pay £25 pa (with Selftrade) to keep my shares in an ISA wrapper. I don't really need to do that at the moment as I don't fill out a tax return, or pay tax on my earnings. However, my circumstances may change in the future and to me, it's a small overhead to pay against the value of my portfolio.

Ah - so when you apply for a S&S ISA, you get the choice of holding up to £3600 in cash.... how is the interest on that defined? Obviously not by their best rate deals.. (or is it?) - do they have a separate rate for cash in a S&S ISA?

cheerfulcat

MRLX69 wrote: »

What do you mean by no need to declare disposals? - do you mean selling shares?

Yes - when the total proceeds - not just profit - of investments outside of a tax shelter disposed of ( sold or in some circumstances, given away ) in any tax year is greater than four times the annual exempt amount, HMRC would like to know about it.

That's another thing - where does the dividends go? - back in the S&S ISA? As cash?

Yes, back into the ISA as cash. You can choose what to do with the dividends after that - some brokers offer an automatic re-investment option, where dividends are used to buy more shares/units. Alternatively, you can keep the cash in the ISA for future purchases or as dh writes, have it paid out to an external account.

So if I'm a higher rate tax payer, I'll be paying 40% on my dividends? - But in an ISA it'll be only 20%?

Dividends are currently taxed at 10%; they come with a "tax credit" which covers the liability for a basic rate tax payer. A higher rate tax payer would have a further tax liability of 22.5% outside of an ISA.

debbie42

MRLX69 wrote: »

Ah - so when you apply for a S&S ISA, you get the choice of holding up to £3600 in cash.... how is the interest on that defined? Obviously not by their best rate deals.. (or is it?) - do they have a separate rate for cash in a S&S ISA?

Not quite, if I've read your question correctly.

I have a completely separate cash ISA, with a bank. I also have a S&S ISA, with Selftrade. Theoretically (I haven't tried it yet) you should be able to transfer from the cash ISA into a S&S ISA. This is an option introduced this year in the ISA rules. I haven't looked into the partial transfer scenario.

Selftrade don't pay great interest on cash in their ISA, so it makes sense for me to keep it in cash until I decide to invest more in S&S. At the moment I'm comfortable with the split between cash and S&S so am not in any rush!

H&L were paying a better rate on cash, according to their ads, but they deal more in funds, so I haven't used them as yet.

MRLX69

debbie42 wrote: »

Not quite, if I've read your question correctly.

I have a completely separate cash ISA, with a bank. I also have a S&S ISA, with Selftrade. Theoretically (I haven't tried it yet) you should be able to transfer from the cash ISA into a S&S ISA. This is an option introduced this year in the ISA rules. I haven't looked into the partial transfer scenario.

Selftrade don't pay great interest on cash in their ISA, so it makes sense for me to keep it in cash until I decide to invest more in S&S. At the moment I'm comfortable with the split between cash and S&S so am not in any rush!

H&L were paying a better rate on cash, according to their ads, but they deal more in funds, so I haven't used them as yet.

Oh, ok....

So you have (for simplicity) ONE cash ISA and ONE S&S ISA.
You opened them both at different tax years right?

And each year, you still can only contribute to one. So you cannot put 3600 into your cash and 3600 into your S&S - is this right?