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    • C_Mababejive
    • By C_Mababejive 14th Apr 18, 7:55 PM
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    C_Mababejive
    Bed and ISA or buy more?
    • #1
    • 14th Apr 18, 7:55 PM
    Bed and ISA or buy more? 14th Apr 18 at 7:55 PM
    I'm not a financial wizzkid so here goes..

    I have a stack of shares in certificated form outside of an ISA with a yield of between 5 and 6%

    Should I

    a) Sell a bunch of the shares and bed and ISA them to shelter them from tax

    or

    b) not sell any of the certificated non isa shares and simply buy more of the same within the ISA?

    There is capital again within the allowance but i could always use this elsewhere?

    Essentially, should i let the tax tail wag the investment dog ?

    Thanks all..
    Feudal Britain needs land reform. 70% of the land is "owned" by 1 % of the population and at least 50% is unregistered (inherited by landed gentry). Thats why your slave box costs so much..
Page 1
    • Alexland
    • By Alexland 15th Apr 18, 7:20 AM
    • 3,022 Posts
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    Alexland
    • #2
    • 15th Apr 18, 7:20 AM
    • #2
    • 15th Apr 18, 7:20 AM
    Hard to say really without understanding you, the inventory and value better. And how you would otherwise use your capital gains allowance? Personally I find holding investments in nominee accounts and generally S&S ISA, LISA or pension wrapped to be more convenient.
    • bowlhead99
    • By bowlhead99 15th Apr 18, 1:19 PM
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    bowlhead99
    • #3
    • 15th Apr 18, 1:19 PM
    • #3
    • 15th Apr 18, 1:19 PM
    Should I

    a) Sell a bunch of the shares and bed and ISA them to shelter them from tax

    or

    b) not sell any of the certificated non isa shares and simply buy more of the same within the ISA?
    Originally posted by C_Mababejive
    Option (a) means you will have the same amount of shares as you do now and will no longer be exposed to income or capital gains taxes on them. Which sounds sensible.

    Option (b) means - assuming you have enough existing spare cash to fund the ISA without doing any sales - that you will have the same amount of same shares in an ISA outside scope of tax as you would get to in (a), but you will also have a bunch more shares in the same companies outside the ISA as you didn't sell them, and will therefore have a greater total exposure to those companies as well as having more unrealised capital gain.

    There is capital again within the allowance but i could always use this elsewhere?
    If you can use up your annual exemption on selling other shares elsewhere that you are happy to sell, the existence of the annual exemption doesn't really come into the decision making for this potential activity on these shares, as there is no issue of being unable to fully utilise the exemption.

    The existence of the exemption does mean that you are not creating any CGT bill if you were to sell these specific shares because their gains are covered by the exemption, it will just leave less exemption for when you sell other things later in the year.

    Essentially, should i let the tax tail wag the investment dog ?
    The choice between (a) and (b) doesn't seem to be an example of letting the tax tail wag the investment dog and making bad decisions on your investments just to avoid a bit of tax.

    The tail wagging the dog would be deciding to hold assets exposing yourself to potential losses (to which you didn't want exposure) just because you wanted to hold on until the next tax year and get another exemption to use - but taking unnecessary exposures to get there.

    Or, the tail wagging the dog would be selling early an investment that you really wanted to keep, just to catch a tax allowance when actually you might have preferred to hold the assets for potential extra net gains in excess of the tax bill you stood to pay.

    Both of those examples are situations where you do something wrong by putting tax avoidance ahead of sensible investment allocation.

    But here you choice doesn't really seem to be that. The choice is either to end up with:

    in (a), sell your certificates and end up with a bunch of shares in X plc in an ISA

    in (b), do not sell your certificates and spend cash to end up with a bunch of shares in X plc in an ISA, while still holding a bunch of shares in X plc outside an ISA as well.

    In (b) the difference is that you have more shares in X plc and less cash in your bank or ISA (because you did not have any sales proceeds from certificated shares to help fund the in-ISA purchases).

    In both routes, you have X plc shares in the ISA but in (b) you have more exposure to X plc shares and less cash or other assets.

    So you could say that going for option (b) compared to option (a) is preferring a situation where in addition to the ISA full of X plc shares you have less cash in your bank and some certificated shares in X plc as well, which already have an embedded unrealised capital gain (albeit currently below the annual exemption level).

    If I already held a bunch of X plc shares in my ISA, would I choose to go out today and buy some further certificated shares in that company, which came with an embedded capital gain? Probably not. Unless X plc shares are the best shares on the planet, I would generally prefer to spend cash on shares in some other company (for better diversification) which did not have an embedded capital gain (for easier management of CGT bills).
    • C_Mababejive
    • By C_Mababejive 15th Apr 18, 7:14 PM
    • 10,539 Posts
    • 9,477 Thanks
    C_Mababejive
    • #4
    • 15th Apr 18, 7:14 PM
    • #4
    • 15th Apr 18, 7:14 PM
    Thanks bowlhead, i shall review your words of wisdom.

    Part of me did think that i shouldnt increase my holding in x plc (RDSB) because of course its a single entity and somewhat volatile albeit having a nice divi though the price is in the ascendancy.

    Instead a better plan might be to bed and ISA a chunk of them to realize a chunk of capital gains and shelter divis from tax, then use other money to buy a more diverse investment such as an investment trust like SMT.. I'm trying to avoid funds due to ongoing charges. I'm thinking id rather pay one off charges and hold for maybe 10 years.
    Feudal Britain needs land reform. 70% of the land is "owned" by 1 % of the population and at least 50% is unregistered (inherited by landed gentry). Thats why your slave box costs so much..
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