Mini ISA stocks/shares: costs?

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codetown
codetown Posts: 685 Forumite
in ISAs & tax-free savings
Can anyone mention the costs for operating a MiniISA with some funds in it?

I am thinking to invest 4k in a MiniISA in the next few days as a tax efficient investment. I have not done this before. I am thinking to buy some funds (yet to be chosen). But I would like to understand what sort of costs I will incur.

As an example I looked at Squaregain for a Self-select ISA.

From what I understand I would need to pay:
- 25 pounds - flat fee for the miniISA
- 15 pounds for each transaction

Questions:
1) Assuming I buy 4 funds (1000 pounds each), will I pay 25 +4*15 = 85 pounds. Am I correct? (this is already 2.1% of the capital!).
I do not intend to actively trade these during the year, but just let them grow.

After this initial cost, how do the management fund charges come into play? How are they added? Is this subtracted to the total of units I can buy?

2) Can anyone explain this for me (taken from the Squaregain FAQ):
"How is interest received in a self-select ISA treated for tax purposes?
HM Revenue & Customs (Inland Revenue) rules for self-select ISAs mean that we have to deduct tax at 20% from the interest payable on cash deposits and pay this to the HM Revenue & Customs (Inland Revenue). You cannot reclaim the tax credit. "

Not sure how to read this. Is a Fund-based MiniISA taxed at 20% ???
If this is true where is the tax advantage?

3) Also is Squaregain the recommended/most used way to do simple ISA stocks investments?

Comments

  • dunstonh
    dunstonh Posts: 116,371 Forumite
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    3) Also is Squaregain the recommended/most used way to do simple ISA stocks investments?

    A self select ISA is ideal for buying shares. Not for buying funds. If you want to buy funds then you are better off with a funds supermarket.
    I am an Independent Financial Adviser (IFA). The comments I make are just my opinion and are for discussion purposes only. They are not financial advice and you should not treat them as such. If you feel an area discussed may be relevant to you, then please seek advice from an Independent Financial Adviser local to you.
  • codetown
    codetown Posts: 685 Forumite
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    dunstonh wrote:
    A self select ISA is ideal for buying shares. Not for buying funds. If you want to buy funds then you are better off with a funds supermarket.

    Such as? A few names please.
    it is likely I will invest once and leave it go for the year... and I want an ISA wrapper around it.

    Going trough a list in moneysupermarket is not so easy, as their search engine is geared towards constant share dealing (at least 1 a month!), while I will not operate like this.

    Is "self trade" useful for this type of fund ISA buying? It looks the cheapest (no annual charges, similar price for buying as the others).
  • EdInvestor
    EdInvestor Posts: 15,749 Forumite
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    Squaregain will charge you 12.50 to buy each fund and a flat rate of 25 quid for the ISA wrapper.It will discount the 5% initial charge on the fund, but you will have to pay the 1.25% pa. annual mangement charge of the fund. :(

    Squaregain is really set up for bigger portfolios of shares, where the flat fee for the ISA is a negligible charge. With shares you only pay the dealing fee (plus stamp duty) -there is no annual management fee or initial charge.

    What you need is a fund supermarket or discount IFA, which won't charge you a dealing fee and will discount the fund charges.

    I've heard Bestinvest and Hargreaves Lansdown, also Fidelity recommended by posters here, haven't used either myself as I'm a share investor.
    Trying to keep it simple...;)
  • cheerfulcat
    cheerfulcat Posts: 3,338 Forumite
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    codetown wrote:
    Can anyone explain this for me (taken from the Squaregain FAQ):
    "How is interest received in a self-select ISA treated for tax purposes?
    HM Revenue & Customs (Inland Revenue) rules for self-select ISAs mean that we have to deduct tax at 20% from the interest payable on cash deposits and pay this to the HM Revenue & Customs (Inland Revenue). You cannot reclaim the tax credit. "

    Not sure how to read this. Is a Fund-based MiniISA taxed at 20% ???
    If this is true where is the tax advantage?

    No, only the interest on cash in a S&S ISA is taxed. The tax advantage is that your gains are free of capital gains tax.
  • flashf
    flashf Posts: 22 Forumite
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    Through the mse site I got a free copy of moneywise (with Martin's mug shot on the front). It came with a supplement from Willis Owen, and their fund deals in terms of discounted charges are the best I've found so far. You can find the same thing on their website.
  • carnet
    carnet Posts: 501 Forumite
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    flashf wrote:
    It came with a supplement from Willis Owen, and their fund deals in terms of discounted charges are the best I've found so far

    Willis Owen's IC discounts are, on many, if not most, funds, not as generous as those offered by Hargreaves Lansdown.

    They also give no trail commission rebates, which both HL and Cavendish Online offer (the former at, typically, 50% with no fees and the latter 100% but with initial and annual fees). Commshare also do the same but their IC discounts tend to be not as competitive - nor, for that matter, are Cavendish's ;).
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