Timeline for ISA - intra year profits and switching process
Current License: CC BY-SA 3.0
23 events
| when toggle format | what | by | license | comment | |
|---|---|---|---|---|---|
| May 13, 2014 at 23:20 | comment | added | Chris | I can't help you any further, I'm afraid. | |
| May 13, 2014 at 23:04 | comment | added | opt | I actually have experience with investing but not with funds. And the English system, with tax allowances and ISAs, is new to me. Today you clarified most of the open issues I had. Now, as said, I'm trying to figure out which broker is best to invest. I already have a shortlist of absolute return funds and some balanced funds to invest into. I can tolerate high volatility so I'm confortable with risks associated with that kind of funds. Then, I would switch between investments when needed so it is important to have a broker that actually has no switching charges and with quick dealing times. | |
| May 13, 2014 at 22:49 | comment | added | Chris | By the way you put £ at the end of your numbers, I don't think you are a native English speaker. If you're originally from another country, this is a further reason why you need advice before risking £15,000 in investments. The financial world in the UK is very complex, the rules are plentiful. Seek advice. At the very least, paper-trade a few funds whilst you learn the ways of our system. | |
| May 13, 2014 at 22:45 | comment | added | Chris | Honestly... I'd spend more time doing research & making sure the rest of my finances were secure. Only invest money you can afford to lose. Make sure you have an emergency fund in place, are free of debts & then think of investing. Index trackers & diversified mutual funds may not be as exciting but they'd still be risky in the short-term. Stay away from single stocks or high-risk funds if you couldn't afford to lose all of your capital. Again, some sessions with an adviser will save you a great deal of losses in the future given how unsophisticated you are in the investment world currently. | |
| May 13, 2014 at 21:32 | comment | added | opt | Thanks again Chris. I learnt a lot of stuff today and it's surprising how investing is made tax efficient for small investors (capital gain allowance + ISA). Since I'm stil in the valuation process, do you have any suggestion about which broker to use for investing? I have a Barclays bank account and a natural choice would be Barclays Stockbrokers. But I also saw Best Invest and Fidelity. The latter has a comparative table where it seems that it is the cheapest one. And the fund range is very similar. But I would appreciate your suggestion on this. Thanks. | |
| May 13, 2014 at 20:57 | comment | added | Chris | Income Tax details: hmrc.gov.uk/rates/it.htm#1a Capital Gains Tax details: hmrc.gov.uk/rates/cgt.htm#1 | |
| May 13, 2014 at 19:38 | comment | added | opt | I will certainly ask some advice when selecting investments. I am surprised by this high allowance even otside an ISA. But probably I am wrong and this 10,900£ tax free allowance applies to all incomes (so salary+investments profits). It looks too high if it's just for investments profits. | |
| May 13, 2014 at 19:29 | comment | added | Chris | Your follow-up question is actually relating to Capital Gains Tax (CGT). If you hold something for a long time, then it may appreciate in value to the CGT limit. Seriously - my advice to you would be to seek help from a professional. Your questions are about basic foundations of investing. If you struggle now, then the chances of the investments going well are slim. #ToughLove | |
| May 13, 2014 at 19:26 | comment | added | Chris | I must say this though: wherever money is involved, if you don't understand it then DON'T do it. You are struggling with the logic of ISA limit calculation. That won't be anywhere near as complicated as picking funds (or heaven forbid, individual stocks) to go into the ISA. It is always worth seeking financial advice or even consulting Money Advice Service or Citizens Advice for more guidance. If you lost this £15,000 that you could potentially invest here, it's an expensive mistake when a few pounds to an adviser might have avoided such a mistake. Just my tuppence worth... | |
| May 13, 2014 at 19:25 | comment | added | opt | How does this all fit with the current allowance that exists outside ISAs? If I read correctly, we already have no taxation on profits up to 10,900£. That is actually a big amount for me. I shoul invest approximately 80,000£. The existing allowance means that if I get 10% profit (8,000£) this is already tax free. Only if I expect profits higher than 10,900£ it make sense to open an ISA and move 15,000£ into it. Is that correct? | |
| May 13, 2014 at 19:20 | comment | added | Chris | Yes, you have any time during the 2014/5 tax year to open an ISA. Opening the account TODAY would give you an allocation of £11,880. Once the 1st of July arrives this will automatically increase to £15,000. Fidelity will no doubt send correspondence to you to confirm this. | |
| May 13, 2014 at 19:11 | comment | added | opt | Thanks Chris. I was opening an ISA account with Fidelity. What about the 5th of April deadline? Am I still on time to benefit from ISA allowance if I open the account now? | |
| May 13, 2014 at 19:10 | comment | added | Chris | Glad to help. I tried looking for a good explanation on Google, YouTube and the like. Nothing. Even MoneySavingExpert doesn't make this clear. | |
| May 13, 2014 at 19:08 | comment | added | Chris | So important points. 1) The performance is irrelevant. 2) At any time you could add £5,000 as that is the leftover limit. 3) If the post-contribution performance did matter, you'd never know how much you could put in as you'd need real-world timing to calculate. 4) Any profits/losses are within the dealing account. The ISA limit is independent of performance. It counts only contributions into the ISA (here, just one transaction of £10,000). Selling and buying within the account is all happening INSIDE the ISA. It is seen as swapping from stocks to a 'temporary' cash balance. | |
| May 13, 2014 at 19:05 | comment | added | opt | Ok that clarifies my doubt. If money going out from the first investment still remains in the ISA then any new investment should be allowed within the ISA allowance. Thanks a lot for your help. | |
| May 13, 2014 at 19:01 | comment | added | Chris | You're thinking one level too deep. Let me see if I can put your example into a real world scenario. "John opens a Hargreaves Lansdown account, specifically their stock & shares ISA. He deposits £10,000. Using the £10,000 he invests in FundA and within 2 months, the value is up to £14,000. John then sells FundA. The £14,000 sits in his Hargreaves Lansdown account for a few weeks until John invests in FundB. After a month, FundB has fallen and the value of the investment is now £12,000." So - £10,000 went in to the ISA. That's the only figure that counts towards the limit. £5,000 still left. | |
| May 13, 2014 at 18:54 | comment | added | opt | Sorry Chris, what is not clear is how the switch is considered. Switching from A to B involves a sell of A and a buy of B. Does the sell of A imply that I moved out from my ISA so that when I want to come back into it to reinvest in B I am only allowed to put 5,000 (the difference between the allowance and the initial contribution)? | |
| May 13, 2014 at 18:50 | comment | added | Chris | Let's break this down into more simple terms. You put £10,000 in. Regardless of how the fund then performs, you are still able to put £5,000 more in. That's because only the original contribution is counted. The gains/losses once invested aren't counted towards the limit. Is that clearer? | |
| May 13, 2014 at 18:48 | comment | added | opt | So in my example I would be allowed to put the 11,000£ obtained from sellinf FundA and add other 4,000£ to invest in total 15,000£ into FundB? Do I understand it correctly? | |
| May 13, 2014 at 18:42 | comment | added | Chris | All of your analysis of Fund A to B, etc is unnecessary. You put £10,000 in. That's the amount that is counted towards your limit. You are free to add another £5,000. It doesn't matter whether that original £10k has gone up or down in value - it was £10,000 at time of contribution. Count the value of the contributions that you put into the ISA. The performance afterwards is free of taxes. But the value of the contributions as they go in are the only amounts you need to pay attention to when thinking of the limit. As I said, you're merely over-thinking it. | |
| May 13, 2014 at 18:39 | review | First posts | |||
| May 13, 2014 at 18:42 | |||||
| May 13, 2014 at 18:33 | comment | added | opt | Thanks for the answer Chris. Sorrry but I don't have any experience with ISA and fund investing in general. So, just to clarify... let's say that I start with 10,000 invested in FundA. It's an equity fund and market went up. After some time I think market is going to drop so I decide to sell the fund and realize the profit, let's say 1,000. If I decide to switch to another fund, FundB that is a monetary fund (so less risky) can I put my 11,000 (the original 10,000 plus the 1,000 profit) in FundB? It's still within the ISA allowance but am I allowed to act this way? | |
| May 13, 2014 at 18:21 | history | answered | Chris | CC BY-SA 3.0 |