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Are ISAs actually worth it?
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Dennis .
Posted: 22 February 2012 10:21:30(UTC)
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Can anyone remind me of the benefit of non cash ISAs for most basic rate tax payers? Dividends are taxed at source anyway and unless you are making capital gain disposals of over £10.6K (for which you need quite a big portfolio) it doesn't affect you. Holding individual shares in an ISA attracts a "management fee" of about 0.5% too. ISAs don't help with inheritance tax, you can't have a joint ISA with your spouse etc.
I am a pensioner with a private sector DB pension I have over £150K in non cash ISAs and was just wondering what the real benefit is to me?
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JeremyFry
Posted: 22 February 2012 12:16:35(UTC)
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Joined: 18/01/2010(UTC)
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Dennis - I think the capital gains exemption is the main point - and CGT is taxed on annual gains rather than on disposals. On a portfolio like yours of £150K I would imagine that a good year on the markets could easily see a return of 10% and so exceed the threshhold.

From HMRC:

"Each tax year nearly everyone who is liable to Capital Gains Tax gets an annual tax-free allowance - known as the 'Annual Exempt Amount'. You only pay Capital Gains Tax if your overall gains for the tax year (after deducting any losses and applying any reliefs) are above this amount."

Best,

Jeremy
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Jamie Turnbull
Posted: 22 February 2012 12:19:36(UTC)
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Joined: 17/02/2012(UTC)
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Surely you answered your own question? You have £150k in stocks and shares ISAs. If the stocks were held without the ISA wrapper and you decided to sell, you would have to pay quite a lot of it to Mr Osborne.
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alangb
Posted: 22 February 2012 12:23:39(UTC)
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If you are not a higher rate tax payer I think it is unlikely that you will have a capital gains tax liability.
The main advantage of ISAs must be the freedom from higher rate income tax liability.
It is difficult to see any other advantage apart from not having to mention any ISAs on yourr tax return.
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awol47
Posted: 22 February 2012 12:24:29(UTC)
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Within ISA's I believe income from bonds/bond funds is paid as interest and is tax free and this income does not count against your personal tax allowance either.
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1 user thanked awol47 for this post.
antigricer on 22/02/2012(UTC)
JohnB
Posted: 22 February 2012 12:27:22(UTC)
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Dennis,

You can draw income from the ISA without it counting against your personal income tax allowance.

BTW there are ISAs around which don't charge you a holding fee for individual shares.
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2 users thanked JohnB for this post.
colin wilson on 22/02/2012(UTC), antigricer on 22/02/2012(UTC)
Julie Dudley
Posted: 22 February 2012 12:29:19(UTC)
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The most valuable benefit is once you are 65 and age allowance is applied to your income. You will recieve a higher tax-free personal allowance but currently if your income is over £24,000 your extra allowance will be clawed back at the rate of £1 for ever £2 of extra income. Dividend income taken from your stocks and shares ISAs will not count towards your income and possibly push you over the age allowance threshold.
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5 users thanked Julie Dudley for this post.
Scottino on 22/02/2012(UTC), colin wilson on 22/02/2012(UTC), antigricer on 22/02/2012(UTC), Keith Thomas on 22/02/2012(UTC), Ron M on 23/02/2012(UTC)
The Colonel
Posted: 22 February 2012 12:30:35(UTC)
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Its worth it just to be able to avoid including Share transactions within the ISA
on your Tax return. I wish they would make AIM Shares eligible for ISA's
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Chart Trader
Posted: 22 February 2012 12:34:06(UTC)
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Capital Gains Tax on shares: the basics
You may have to pay Capital Gains Tax if you make a profit when you dispose of shares and certain other investments,securities or debentures. Disposing of shares includes selling, giving away or exchanging them.
You report any gains and losses by completing a Self Assessment tax return.
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Scottino
Posted: 22 February 2012 13:16:57(UTC)
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Do not forget that you also can buy/sell within 30 days and avoid silly complications with CGT that exist outside the ISA.
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Dennis .
Posted: 22 February 2012 13:24:00(UTC)
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Julie Dudley;13989 wrote:
The most valuable benefit is once you are 65 and age allowance is applied to your income. You will recieve a higher tax-free personal allowance but currently if your income is over £24,000 your extra allowance will be clawed back at the rate of £1 for ever £2 of extra income. Dividend income taken from your stocks and shares ISAs will not count towards your income and possibly push you over the age allowance threshold.



Unfortunately (?) my occupational pension plus state pension will deliver well in excess of £24K but not enough to have a 40% problem so that doesn't help very much but I take the point about the contribution of ISA income.
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Keith Thomas on 22/02/2012(UTC)
John Thorley
Posted: 22 February 2012 14:10:35(UTC)
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Joined: 20/08/2009(UTC)
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The problem with stocks and shares ISA's is that it alters buy and sell decisions. I had seen my IFA in spring 2008 and explained I wanted to sell my ISA's and he persuaded me not to because I would lose the tax wrapper of the ISA's I had built up over the years. This 'advice' cost me £1000s! I have only invested in cash ISA's since and the stocks ISAs still show no signs of ever getting close to their pre crash value.
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abbass hassan
Posted: 22 February 2012 14:41:50(UTC)
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Joined: 13/06/2009(UTC)
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Where is the best isa at the moment please.
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Matthew Charles Flinders
Posted: 22 February 2012 14:42:04(UTC)
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awol47;13987 wrote:
Within ISA's I believe income from bonds/bond funds is paid as interest and is tax free and this income does not count against your personal tax allowance either.



This is true, if you hold your S&S ISA in Equity you get taxed the 10% at source, where as if it is held in a bond fund there is no tax deducted from the income payment.
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2 users thanked Matthew Charles Flinders for this post.
antigricer on 22/02/2012(UTC), Keith Thomas on 22/02/2012(UTC)
antigricer
Posted: 22 February 2012 15:29:11(UTC)
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The Colonel;13990 wrote:
Its worth it just to be able to avoid including Share transactions within the ISA
on your Tax return. I wish they would make AIM Shares eligible for ISA's



Colonel,
I understand your point of view but I am concerned that if AIM shares were to be made eligible for inclusion in ISA's the existing concession to allow certain (qualifying) AIM shares to be free of IHT after 2 years would be withdrawn.
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Sinic
Posted: 22 February 2012 15:38:48(UTC)
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In response to John Thorley's comment about his advisor advising him to keep his ISAs to retain the 'wrapper' and a resulting loss of £ 000's by doing so, this was not necessary. I hold and manage around £600k of ISAs on behalf of my wife and self within a Vantage Account at Hargreaves Lansdown. I regularly move in and out of funds and stocks at will and have been known to stay in cash in part for months at a time. I understand such an arrangement is not exclusive to HL.
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colin wilson
Posted: 22 February 2012 15:40:52(UTC)
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John Thorley
You can sell (and buy) your shares held in a share isa and go into cash within the wrapper, I do it on a regular basis.The revenue people allow you to hold cash within the isa as long as you intend to reinvest in shares etc, though as a rule any interest on cash held, paid by the isa company is very minimal if any.
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jeffian
Posted: 22 February 2012 15:46:37(UTC)
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John Thorley,
I'm not sure your IFA gave you very good (or at least complete) advice when he advised you not to sell in Spring 2008 if you simply wanted to protect yourself from falling equity values. It's only when you draw your cash out of the ISA that you lose the tax-free 'wrapper' but there was nothing to stop you selling your shares and reinvesting the proceeds in, say, corporate bonds or Gilts (in fact, you would have done rather well).

In terms of the original question, I have to say it is something I've asked myself on several occasions as many people (myself included at the moment) simply lock capital away for years, never draw on it and then lose 40% of it to the taxman when they die. I tend to treat it as a 'rainy day' fund but I'm determined to spend some of it before I die or what's the point?!
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Danny Cox
Posted: 22 February 2012 17:09:16(UTC)
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The tax benefits of ISA have been detailed in other posts.

There are no downsides to having investments in an ISA, where as there are potential tax downsides to not having investments in ISA.

An ISA portfolio is ring-fenced from further tax, regardless of what happens to tax bands, rates or allowances - and we are seeing more people fall into the higher rate tax band each year.

Since investing in an ISA usually costs no more than investing outside of an ISA the tax breaks, are, in effect free.
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1 user thanked Danny Cox for this post.
Keith Thomas on 22/02/2012(UTC)
Linda Green
Posted: 22 February 2012 21:25:47(UTC)
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Joined: 07/04/2011(UTC)
Posts: 6
For those, like me, who had kids late, the income from them doesn't have to go on the student finance form. Problably not much use to most pensioners, except for those on early retirement, like myself.
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