Shares or ISA?

newbie18 · 10 January 2018 at 12:53PM

I'm confused - I was hoping to invest a small amount of money in stocks & shares & looked at the website for advice. The Investment for Beginners page says investing in an ISA should always be the first port of call yet the Stocks & Shares ISA page says the ISA route is not the best option if your CGT is beneath the tax free threshold (which mine definitely is).

I feel like I'm going in circles.
Does anyone have advice on which page/advice to follow please?

TIA

MallyGirl · 10 January 2018 at 1:04PM

I can see how that might be confusing. It depends on whether you are thinking long term really.

If you make an investment and hold it for 20 years it might well have gained more than the CGT limit and if you wanted to sell it all in one go then it would be better if it was in an ISA to avoid CGT. If you were selling more regularly then you could just sell enough to keep you under CGT. You would have some record keeping to do to prove this.
Long term, an ISA is the way forward. It is simpler and avoids tax altogether.

chucknorris · 10 January 2018 at 1:05PM

newbie18 wrote: »

I'm confused - I was hoping to invest a small amount of money in stocks & shares & looked at the website for advice. The Investment for Beginners page says investing in an ISA should always be the first port of call yet the Stocks & Shares ISA page says the ISA route is not the best option if your CGT is beneath the tax free threshold (which mine definitely is).

I feel like I'm going in circles.
Does anyone have advice on which page/advice to follow please?

TIA

I think that is poor advice, tax free dividends are IMO a much more important advantage than avoiding CGT, which can easily be avoided/mitagated outside of ISA's anyway.

Audaxer · 10 January 2018 at 1:16PM

If you have a small amount you want to invest in stocks and shares you would definitely be better doing it within a Stocks and Shares ISA as there is no tax to pay at all, and you can currently invest up to £20k in each tax year. The decision is then which platform/broker to invest through and which funds to invest in. If you are starting out you are best considering a global diversified low cost multi asset fund. There is lots of information on this forum and on sites like Monevator.

BananaRepublic · 10 January 2018 at 1:19PM

As said above, an ISA will protect dividends from tax, as well as protecting you from CGT.

You are best off with a collective fund such as an OEIC rather than stocks and shares. The latter requires much more research, and you must hold a portfolio (shares from many companies) in order to reduce the risk.

Eco_Miser · 10 January 2018 at 5:46PM

An ISA exempts the contained investments from both income tax and CGT. It also saves you from keeping detailed records to determine how much CGT is payable when you sell (or prove there is no CGT due).
Outside of an ISA you can have £5000 of dividends this financial year with no tax to pay, but it's still taxable income and could increase your tax band. It's only £2000 in 20018/9 and a future Chancellor could reduce that even further.
CGT applies to more than stocks and shares, you may find you want to sell in the same year as you made a taxable gain elsewhere, or you need to sell more than is covered by one year's allowance. In an ISA that doesn't matter.

There may be cases where you could use your ISA allowance more profitably with a different kind of ISA, but unless that applies, use an S&S ISA.

Shares or ISA?

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