Ok i am pretty new to the share dealing game, i understand the basic principal that you can bed and isa a set of shares so that they are basically wrapped in the ISA and sheltered from future capital gains tax.

What i’m not too sure about is whether i can then trade these shares as normal ie, sell as they drop and buy back at a lower price etc. That is just an example by the way off the top of my head.

The stocks i have now i will be keeping for the medium to long term so i’m not looking to play with them too much but i am just trying to work out the limitations of Bed and ISA.

Cheers in advance 🙂

Yes once in the isa you can sell them, sit on the cash within the isa and then hopefully buy them back later at a better price. Sell in May and go away…hopefully.

I have a core holding for income and then spec positions. Tbh for the stress it causes i may just leave them all in the pot and bank the divis.

Just remember that the fees you’ll pay on dealing mean that you need huge swings up and down or be dealing in big sums before it makes sense to sell off and rebuy

Good stuff, cheers all. Making a lot more sense now 🙂

Trail rat, yea i’m not doing a lot of dealing due to fees and the stocks spread taking a good chunk. Im in for the medium to long term 🙂

Yes stamp duty, buy and sell fee are c 1% transaction value for me. Yesterday i banked some profits, today i could buy them back and make some profit after fees. Its pretty rare though, normally i have to wait a few weeks. Dont forget the default position of doing nothing costs nothing and incurs no stress.

Poolman i am mainly looking at future returns and CGT. Thats the single reason for thinking about Bed + ISA. I know the allowance is £11,000 per financial year and i am well within that but there is a possibility that may change.

I think ill call an advisor tomorrow for a chat. I use Hargreaves & Lansdown for my trading platform and they are usually pretty good if i have novice questions. Which is regularly to be fair 🙂

i understand the basic principal that you can bed and isa a set of shares so that they are basically wrapped in the ISA and sheltered from future capital gains tax.

Bed and ISA is more about crystallising an existing capital gain to within this years CGT allowance. By swapping shares in and out yearly you could maximise the use of your annual CGT allowance instead of paying tax on a few years’ gains in one hit.
The initial holdings don’t need to be huge. A keen eye or a hatful of luck can soon make Bed and ISA worthwhile. Fill your ISA first.

I m an expat so cant have any new isas so i have to keep an eye on cgt liability. Tbh i try and split my returns tax free, so this year 5k divs and as stated, up to 11k cgt free.

Rdsb for eg went x div today, i sold yesterday so missed the 38p div, but they actually fell 90p. You effectively create your own divs by buying and selling. It could of course gone the other way, but they looked fairly fully valued so i sold a tranche. You know your dealing fees and stamp duty, so can work out what size lot you need to be turning over. Its usually about 3k for me.

Tbh i try and split my returns tax free, so this year 5k divs and as stated, up to 11k cgt free.

Poolman, you live in Spain, right? Without getting too personal, how are your tax affairs? Do you pay tax here or there? Does the Spanish taxman recognise ISAs, etc?

If you’re an expat then surely no CGT issues (at least, not in the uk)? ISAs have been largely useless since inception (even dating back to PEPs) but now the dividend tax does tip the balance a little in their favour. Anyone banking 11k in gain per year has far too much capital to have put it into an ISA anyway.

Anyone banking 11k in gain per year has far too much capital to have put it into an ISA anyway.

Not so. Over the years the total size of ISAs held can grow quite subsantially.

As an expat you can keep your old isas but not create any new ones. Cgt is still due on any uk derived gains. The 11k cgt and 5k divi is q generous though, 16k plus the 11k personal allowance is 27k gbp tax free, so more than the uk avg salary.

And the Spanish taxistas aren’t interested? Is that likely to change?

No idea re future, like uk they dont want to scare tax payers away. Most expats could base themselves anywhere.

11k gain per year on a regular basis is either extraordinarily lucky or based on a very large amount of capital. Yes, over time the annual isa allowance builds up but like I said there was actually no real advantage in early years especially when providers generally imposed fees which exceeded any tax savings. Back in the day PEPs were only something like 5k per year weren’t they?

Even now you’d need about 70k invested to reach the (newly reduced) 2k dividend exemption, and the actual tax payable on say 150k is only a pittance (3% yield = 4500, 2000 exemption and 10% on the rest is 250 quid isn’t it?). Fact is, it’s not hard to avoid paying significant tax on investments of this sort of size, and it would take decades to shelter anything much larger.

Anyone banking 11k in gain per year has far too much capital to have put it into an ISA anyway.

There are plenty of ISA millionaires about….

PEPs and ISAs have been going a fair old time. If you put the max in every year and are lucky, £11k gain per annum would be quite easy to achieve.

Also, we’ve had the £ devaluation, which will have gained most people about 12% and then there’s been a bull run for the last few months, so stocks are very high at the moment. I’ve made over 20% so far this year.

Yes footflaps I agree with that (well I haven’t done the sums but I suspect that’s true). The point is that at the outset PEPs generally had a management fee and no benefit, so some people (myself included) never bothered with them. Now with recent changes to dividend taxation (and free ISAs) there’s possibly a small benefit. But it’s all in the noise anyway, tax on divi yield is bugger all really.

I haven’t paid CGT ever and don’t see this being likely in the future, even though it would take literally decades to shift my investments to ISAs.

Even now you’d need about 70k invested to reach the (newly reduced) 2k dividend exemption, and the actual tax payable on say 150k is only a pittance (3% yield = 4500, 2000 exemption and 10% on the rest is 250 quid isn’t it?). Fact is, it’s not hard to avoid paying significant tax on investments of this sort of size, and it would take decades to shelter anything much larger.

Regarding dividends , then yes, it doesn’t make sense to keep income shares in an ISA, but growth stocks are a different matter. It might not make sense to use an ISA in the early years but after 2, 5, 10, … years it suddenly makes a lot of sense.
UK small caps have put on about 20% since Christmas. Euro small caps look to be taking up the baton…

I follow lord lee of trafford, the first isa millionaire. Worth looking up in interviews, also james bartholomew in the sat telegraph. Questor too, lots of free quality advice out there

I follow lord lee of trafford, the first isa millionaire.

The Treatt queen?

Why would you not isa up income stocks, a higher rate taxpayer pays 32% on divis above the nil rate threshold. Also, divis are unavoidable, capital gains you can play around with – like when you crystalise them

Why would you not isa up income stocks, a higher rate taxpayer pays 32% on divis above the nil rate

As the Captain says you need a substantial holding to pay tax on divis. I’m retired, earning nowt, so my divi allowance is substantially more than i can ever need. CGT is a different matter. It only takes one “lucky” share to use up a good whack of the cgt allowance . THat’s where Bed and Breakfast/ISA comes in

“plenty of ISA millionaires”? 20 years of about 10k subscription = 200k over a period when the ftse has been up and down, maybe up by 50% on average at the very most. How many people have beaten the market by a factor of 3 or more?

“plenty of ISA millionaires”? 20 years of about 10k subscription = 200k over a period when the ftse has been up and down

More than a few…
Of twenty years,there have been seventeen years of gains? but Joe public only hears about the losers. Houses, though, are always winners!
The rest of the world has changed a bit…

How many people have beaten the market by a factor of 3 or more?

The Telegraph did a survey of fund mangers in 2015 and they found over 200 (there were probably more). Markets have risen a fair bit since then, so they’ll be more now. Just need to have invested in any of the tech giants (FB, Apple) etc and you’ll have beaten the market by miles…