@bitflip answered this better than I could have so just my two cents on top:
You are correct, that’s what I did in the past.
Example - I filled my £20k ISA allowance, then invested any spare capital in the GIA.
Once the new tax year started I sold all my shares in the GIA and immediately rebought in the ISA.
Again, being wary of fees here is very important of course and this has a bigger/smaller impact depending on what you are investing in (etfs, US stocks etc.).
In reality the tax advantage of the ISA normally dwarfs these sell & rebuy fees.
Another important factor is if you want the plus universe at some point then the ISA is free To me the Plus makes it a great deal especially with SIPP combined.
If you have stocks that may/could “go to the moon” then it is a no brainer to get an ISA but if you have safe ETFs or stocks that won’t rocket then maybe a GIA and then sell and rebuy when you have enough built up.
Dividend allowance is only 2K. if you have a dividend portfolio averaging 5% yield you only need £40K to hit that allowance.
I’ve put £60K in my ISA, I’m Making more than the 2K dividend allowance, and if I sold the lot in one year I would be over the capital gains allowance as well. you don’t need 10 years of maxing it out to hit those limits
If you plan to be a long term investor, I’d recommend considering either Freetrades ISA or any other providers ISA if the £3 fee isn’t to your taste.
No capital gains or dividend income needs to be declared to the HMRC and the only taxes you will pay is stamp duty on UK listed shares (not CDI shares, nor ETFs) and dividend witholding tax on foreign shares including from the US market shares.
Thank you Dave, I could see the dividend tax allowance can get exceeded. I would also invest enough to max out the ISA each year. Getting 5% return, if I do things correct, does sound very encouraging. I hope in 3 years I get your level of sucess.
Thank you also Samantha. I think I’m looking at 5 years minimum so I guess that’s a midterm investment.
I can see there is strong advise from you all to get an ISA.
I can’t do it until April as I’ve maxed my cash ISA in a fixed account this year so I have a little time to at least start gaining some experience in new type of investment.
I can also see getting a Plus account and leaving £4k in cash earning 3% with then no ISA fee almost makes if a great deal IE £80 interest after tax vs paying £119.88 for Plus.
Hopefully FT doesn’t change its terms and then I guess I need to jump in come April. So decisions, decisions.
I consider myself a small investor. I tend to throw anything between £30-£100 a month into my account depending on outgoings etc. I have however done this since Sep 2019. I was in my late 40’s then and had never had any previous direct exposure to investing in the markets.
I commented on a much earlier thread regarding the Plus account as it was introduced and how I didn’t need what I believed at the time were gimmicks and non necessary features for someone who only invested small amounts . A couple of years on and I’m a fully paid up PLUS account and ISA holder.
One of my very first buys was Sirius minerals (SXX), only held a fairly small amount at around 1.5p per share as I was convinced the UK gov would bail them out of the hole they were in at the time. Didn’t happen, but when it was sold to AA I got around 5.5p for each share and made a profit. That money then went into Greatland Gold at 1.7p and Eurasia Mining at 3.6p (pre Plus days) in my GIA. Both exploded during 2020 and that’s when I explored the use of the Freetrade ISA which I then opened in Jan 21.
I’m not suggesting an ISA is the right thing for everyone but for the price you pay weighed against the potential future costs of Dividend Tax or CGT I consider it a very small price to pay. I now hold 20 AIM stocks in my ISA including around 5k Eurasia and 3k Greatland shares (I did sell GGP at 30p from my GIA but rebought in my Isa at 18p and am still adding at 15/16p) but I’m safe in the knowledge that should any of my other holdings explode at any point in the future , any gains I make are currently out of the reach of Boris and his chums at HMRC.
I try to keep my GIA holdings to a minimum nowadays (although I do still have around 2k EUA shares which could potentially cause a headache if an asset sale or takeover does ever occur) and just tend to use it for the odd speculative punt which in all honesty proved much more difficult to find in 2021 than in 2020 when pretty much everything I looked at turned to gold!!
It is definitely possible to find yourself with tax concerns even when investing small amounts regularly if things move favourably or quickly but in my view by paying for the ISA I have now minimised those concerns.
Hope everyone had as enjoyable Xmas and NY as possible and here’s to a fruitful 2022 for all.
PS I am in no way associated with Freetrade other than an r5/6 investor and user just in case I sound like a salesman
My view on the ISA fee (as someone nowhere near the CGT limit) is that the ISA represents something on which there is political consensus - I don’t see the goalposts changing for money currently sitting within ISAs.
With things such as the capital gains limit in a GIA I don’t feel that you can necessarily say that - if times are really tough economically and fiscally, is the CGT allowance immune from being slashed? I don’t think so. Far from it, if taxes need to be raised under a future Prime Minister (be that a Conservative successor to Boris, or a future Labour PM, the politics are irrelevant here) it seems a softer target than income tax, VAT or NI.
I think you have a good basis of an argument there I do however think it would be at the higher end of earnings through shares if Labour and maybe a small % across all if Tory raise.
Either way it means an ISA is definitely a must if thinking long term for me but for small portfolios people could slowly move stocks across to an ISA when they feel they have a big enough pot if they are slowly adding.
My view on that is you’re likely losing a little in that process, plus the time taken to liquidate/fund the ISA/re-acquire. I don’t disagree with that advice, although in that scenario the point at which it becomes more cost-effective to just go straight for ISA and tolerate the fee comes more or less once you’re thinking of starting with a grand upwards.
Sorry if this has already been covered but I’m a relative newbie. I have ISAs with several banks over the last few years etc. with minimal returns. I can withdraw and top up cash on line immediately as and when I want to. I assume this is the same with the FT ISA. ???