ISA and non-ISA, and taxation

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#1

I have an ISA account and I’m quite new in this game.

I’ve seen that some shares are “Non-ISA” (which means I cannot buy under the current account) and on the account page I can change the type of the account (Investment ISA/Basic Account).
Can I have keep both accounts simultaneously (to be able to switch between them and buy both ISA and non-ISA shares) OR if I switch to Basic Account then the ISA account will be automatically converted to Basic ?
If I can keep both, then, does it mean that once I change the account type, there will be some bank details which I can use to send money to that Basic Account ?

I learnt that for a Basic Account the taxation is done accordingly to the “Capital Gains Tax”. Is the tax applied to only cash money I have at the end of the tax-year or the total value of the stock ?
In other words, if I buy a stock for £10,000 and with all this volatility in 6 months it will be valued at £100,000 then I decided to sell it and with that money I buy another stock which I’ll keep it over the entire tax-year and after, do I have to pay any tax ?

#2

Welcome to the community mia!

To try and answer your questions:

You can have both accounts simultaneously and keep shares in both. The account you select to look at before you make you purchases will be the account the shares are bought in. If you have your ISA account selected you won’t be able to purchase non-ISA shares and would have to switch to you General account.

You will have a unique reference code to put on each transfer from your bank to dictate which account the money is transferred into

My understanding is you will pay Capital Gains Tax on any Gain you come to realise in the tax year above the threshold (£12,300 I believe for this year). Therefore in your example you would have realised gains of £90k selling your £10k purchase for £100k, and would pay the Tax on £77,700 of that. The £90k is a gain you have made in that tax year despite the fact you then go on to invest the money away in investments again.
If your new investment happened to absolutely tank in the remaining months of the tax year and you decided to sell out of your new position too, then you could balance yourself out, writing off any of your previous profit with the losses you incurred on your new investment to pay less Capital Gains Tax. i.e. you were paying Captial gains on £77.7k of your first investment profits, but if your new investment was sold by the end of the tax year at a £50k loss your total to pay Capital Gains Tax on is £27.7k. Again, you would have to “realise” the loss within that tax year and sell the position at a loss in the same year. Happy to be corrected if I’m wrong on any points there.

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#3

Thank you.

#4

Sorry to jump on this thought I would ask another ISA question - I have opened one, sp when it comes to April 2021 to renew - the next 20k will it happen in the same account as current ISA or will I have to create another ISA for 2021/22 and it will be 2 accounts of 20k? rather than 1 of 40k.

#5

I believe you will need 1 account per provider, hence 1 of 40k.

You can choose to open a second ISA with a second provider in which case you would have 2 accounts of 20k.

In the future you may choose to open a third, a fourth account, with a third and a fourth provider and so on.

With the same provider you may be able to open an ISA, a LISA or a SIPP, provided that provider offers it.

Hope this helps

1 Like
#6

Thanks for the response :slight_smile: