Advice: Share Dealing ISA
15 October 2010, 11:18 PM
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Advice: Share Dealing ISA
I'm looking for a quick crash course in the best way to invest in shares without incurring tax penalties.
As a reminder: I am a professional poker player and HMRC do not view any of my income as tax deductible. I tell you this so that you are aware that I currently pay no tax and use non of my yearly income tax allowance.
I am interested in investing money in a particular share and have been told that I should set up a share dealing ISA and invest all that money in the share. This was suggested to me as I would not have to pay any tax on profits whereas I only have an £11k allowance with a normal share dealing account before I would have to pay capital gains tax. Can anyone confirm the validity of my sources claims?
Also, can anyone give me an indication of how (and how easy it is) to set up a share dealing ISA and instruct all of the money to be invested in a single company? Finally, is any one bank going to be better than another for this purpose.
I will continue to research on Google...but I know there are a few financial nuts on here that can probably put things in layman's terms and bring me up to speed
As a reminder: I am a professional poker player and HMRC do not view any of my income as tax deductible. I tell you this so that you are aware that I currently pay no tax and use non of my yearly income tax allowance.
I am interested in investing money in a particular share and have been told that I should set up a share dealing ISA and invest all that money in the share. This was suggested to me as I would not have to pay any tax on profits whereas I only have an £11k allowance with a normal share dealing account before I would have to pay capital gains tax. Can anyone confirm the validity of my sources claims?
Also, can anyone give me an indication of how (and how easy it is) to set up a share dealing ISA and instruct all of the money to be invested in a single company? Finally, is any one bank going to be better than another for this purpose.
I will continue to research on Google...but I know there are a few financial nuts on here that can probably put things in layman's terms and bring me up to speed
15 October 2010, 11:23 PM
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15 October 2010, 11:30 PM
#3
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A share dealing isa is definitely the way to go. They aren't liable for any tax whatsoever. PM if you have any specific questions. Investing in just one stock obviously carries quite a lot of risk.
15 October 2010, 11:40 PM
#4
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Sorry, about the capital gains allowance... It is around 10-11k, but you can only deposit around 10k to buy shares in the ISA per year. However, once the shares have been bought they are exempt from tax on capital gains and dividend income, and you can buy and sell as much as you like once the money had been deposited, regardless of gains.
Last edited by GlesgaKiss; 15 October 2010 at 11:43 PM.
15 October 2010, 11:40 PM
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Understood re: the risk of the stock. It's a share I plan to invest £4-6k in anyway and I accept the risks (lol, the ST220 is up as collateral to keep the wife happy). I'm just looking to do it in a way that would minimise loses through taxation.
So far my research suggests that a share dealing ISA is exempt from CGT...which is good if I get lucky and hit the jackpot. However, I'm a little unclear about income tax and how/when I can take money out and spend it.
So theoretical example (using crazy numbers to illustrate):
I put £10,000 into a SD ISA and buy shares at £1.00 a share. On 01/03/2011 the share trades at £10 and my portfolio is worth £100,000. I am protected from CGT - great. However, can I take that £100k out and spunk it on an F430 or would I pay income tax on that £100k (which, incidentally would constitute all of my taxable earnings for 2010/2011)? In short, how do I get money back out to be spent on real life stuff?
So far my research suggests that a share dealing ISA is exempt from CGT...which is good if I get lucky and hit the jackpot. However, I'm a little unclear about income tax and how/when I can take money out and spend it.
So theoretical example (using crazy numbers to illustrate):
I put £10,000 into a SD ISA and buy shares at £1.00 a share. On 01/03/2011 the share trades at £10 and my portfolio is worth £100,000. I am protected from CGT - great. However, can I take that £100k out and spunk it on an F430 or would I pay income tax on that £100k (which, incidentally would constitute all of my taxable earnings for 2010/2011)? In short, how do I get money back out to be spent on real life stuff?
15 October 2010, 11:50 PM
#7
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Hmm, will get back to you on that one. Not too sure and not in a fit state to find out. Lol.i just presumed any money withdrawn from the account would be tax free
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16 October 2010, 12:21 AM
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An ISA qualifies for CGT, but is exempt from IT. Usually the CG on and ISA wouldn't get you near the limit, but on your figures it would. I would be thinking UT now. With a good accountant you would be looking at a total taxation of around 4% of gain
16 October 2010, 04:25 AM
#10
These people are good (imo). It's all done on line and very easy
http://www.h-l.co.uk/investment-services/isa/apply-now
http://www.h-l.co.uk/investment-services/isa/apply-now
16 October 2010, 06:51 AM
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I'm looking for a quick crash course in the best way to invest in shares without incurring tax penalties.
As a reminder: I am a professional poker player and HMRC do not view any of my income as tax deductible. I tell you this so that you are aware that I currently pay no tax and use non of my yearly income tax allowance.
I am interested in investing money in a particular share and have been told that I should set up a share dealing ISA and invest all that money in the share. This was suggested to me as I would not have to pay any tax on profits whereas I only have an £11k allowance with a normal share dealing account before I would have to pay capital gains tax. Can anyone confirm the validity of my sources claims?
Also, can anyone give me an indication of how (and how easy it is) to set up a share dealing ISA and instruct all of the money to be invested in a single company? Finally, is any one bank going to be better than another for this purpose.
I will continue to research on Google...but I know there are a few financial nuts on here that can probably put things in layman's terms and bring me up to speed
As a reminder: I am a professional poker player and HMRC do not view any of my income as tax deductible. I tell you this so that you are aware that I currently pay no tax and use non of my yearly income tax allowance.
I am interested in investing money in a particular share and have been told that I should set up a share dealing ISA and invest all that money in the share. This was suggested to me as I would not have to pay any tax on profits whereas I only have an £11k allowance with a normal share dealing account before I would have to pay capital gains tax. Can anyone confirm the validity of my sources claims?
Also, can anyone give me an indication of how (and how easy it is) to set up a share dealing ISA and instruct all of the money to be invested in a single company? Finally, is any one bank going to be better than another for this purpose.
I will continue to research on Google...but I know there are a few financial nuts on here that can probably put things in layman's terms and bring me up to speed
^^^ From the horse's mouth so to speak.
Outside of an ISA, your £1 -> £10 example would leave you paying CGT on most of your profit (or capital gain) if you sold the lot at once.
So yes, setting up an ISA to hold the shares would seem a very good idea. You would have complete flexibility as to how/when you disposed of the shares.
If you make anything like £10K within a year, all I can say is "you lucky *******!"
If I was doing this now I'd probably use www.iii.co.uk .
J.
16 October 2010, 07:19 AM
#12
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1)The increase in value of the shares would as you say be a capital gain
2) This holds true whether the profit is £10 or £100000
3) The shares ISA makes this gain tax free.
Why should any of this amount now be liable for income tax? It would defeat the object of having a government backed vehicle that was exempt from a tax rate that was 18% and make it liable for a tax rate that was 40%
I would have thought Saxo gets all of the £100000 and can go out and buy the 430!
ps Saxo, as mentioned buying single shares on a 'tip' is always a high risk strategy
Last edited by Dingdongler; 16 October 2010 at 07:24 AM.
16 October 2010, 08:49 AM
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Hold on that doesn't make sense.
1)The increase in value of the shares would as you say be a capital gain
2) This holds true whether the profit is £10 or £100000
3) The shares ISA makes this gain tax free.
Why should any of this amount now be liable for income tax? It would defeat the object of having a government backed vehicle that was exempt from a tax rate that was 18% and make it liable for a tax rate that was 40%
I would have thought Saxo gets all of the £100000 and can go out and buy the 430!
ps Saxo, as mentioned buying single shares on a 'tip' is always a high risk strategy
1)The increase in value of the shares would as you say be a capital gain
2) This holds true whether the profit is £10 or £100000
3) The shares ISA makes this gain tax free.
Why should any of this amount now be liable for income tax? It would defeat the object of having a government backed vehicle that was exempt from a tax rate that was 18% and make it liable for a tax rate that was 40%
I would have thought Saxo gets all of the £100000 and can go out and buy the 430!
ps Saxo, as mentioned buying single shares on a 'tip' is always a high risk strategy
The other option is to use spreadbetting. So you would bet that the share price increases at a value of, say, £50 per point. For every 1 point the share price goes up you get £50. When you think it can't go any higher, close the bet. You also don't pay any tax on that.
16 October 2010, 10:54 AM
#15
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If Saxo puts £5K into an ISA and purchases shares which subsequently returns £100K the gain would be tax free. If he decided to take income from the ISA, that too would be free of taxation - at least thats my understanding.
Ony time tax would be paid on an ISA would be on death (if you were over the IHT threshold)
Ony time tax would be paid on an ISA would be on death (if you were over the IHT threshold)
16 October 2010, 11:07 AM
#16
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If Saxo puts £5K into an ISA and purchases shares which subsequently returns £100K the gain would be tax free. If he decided to take income from the ISA, that too would be free of taxation - at least thats my understanding.
Ony time tax would be paid on an ISA would be on death (if you were over the IHT threshold)
Ony time tax would be paid on an ISA would be on death (if you were over the IHT threshold)
The moral of the tale? Don't take financial advice from financial advisers like Fast Bloke!
16 October 2010, 11:22 AM
#17
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Hold on that doesn't make sense.
1)The increase in value of the shares would as you say be a capital gain
2) This holds true whether the profit is £10 or £100000
3) The shares ISA makes this gain tax free.
Why should any of this amount now be liable for income tax? It would defeat the object of having a government backed vehicle that was exempt from a tax rate that was 18% and make it liable for a tax rate that was 40%
I would have thought Saxo gets all of the £100000 and can go out and buy the 430!
ps Saxo, as mentioned buying single shares on a 'tip' is always a high risk strategy
1)The increase in value of the shares would as you say be a capital gain
2) This holds true whether the profit is £10 or £100000
3) The shares ISA makes this gain tax free.
Why should any of this amount now be liable for income tax? It would defeat the object of having a government backed vehicle that was exempt from a tax rate that was 18% and make it liable for a tax rate that was 40%
I would have thought Saxo gets all of the £100000 and can go out and buy the 430!
ps Saxo, as mentioned buying single shares on a 'tip' is always a high risk strategy
Edited to say - I see it's been confirmed in the link above.
Last edited by GlesgaKiss; 16 October 2010 at 11:24 AM.
16 October 2010, 11:38 AM
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And, even better, instead of buying shares (which incur 0.5% stamp duty), buy ETFs (Exchange Traded Funds) - exactly the same but without the government taking some up front. i.e. buy an ETF in the stock you want, still within an ISA wrapper.
Gordo
Gordo
16 October 2010, 12:38 PM
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Thanks guys
It seems clear that any gains made in the ISA are protected from capital gains tax - good.
The only remaining issues is whether you would pay income tax on any monies you make from selling your shares and buying cars, holidays, food, clothes, etc. Edd suggests you don't and provides a good logic argument as to why. The link vindaloo provided states, at the top, "ISAs are tax-free savings accounts which means you do not have to declare any income from them." My understanding of that is that growth in your share value and subsequent cashing in would not be regarded as income within any financial year that would be liable for income tax. In other words, you could take out your £100k in one go and not be stung for 40% (or whatever) income tax.
Final confirmation of the income tax issue would be ideal
As for the share, I'd rather not discuss the individual merits of it. Yes, it is high risk and there is a greater likelihood of it doing nothing than something. I already bought £1,000 worth at the start of the summer and have made a 70% gain. I have a direct link to the CEO of the company and there is a lot of positivity about what they are doing at the moment. The phone is next to the desk on standby for the, "GET OUT NOW" call
The reality is that I understand risk and, crucially, am happy to regard the money as 'lost' the moment I invest it. In short, I am only gambling with what I am willing to lose.
It seems clear that any gains made in the ISA are protected from capital gains tax - good.
The only remaining issues is whether you would pay income tax on any monies you make from selling your shares and buying cars, holidays, food, clothes, etc. Edd suggests you don't and provides a good logic argument as to why. The link vindaloo provided states, at the top, "ISAs are tax-free savings accounts which means you do not have to declare any income from them." My understanding of that is that growth in your share value and subsequent cashing in would not be regarded as income within any financial year that would be liable for income tax. In other words, you could take out your £100k in one go and not be stung for 40% (or whatever) income tax.
Final confirmation of the income tax issue would be ideal
As for the share, I'd rather not discuss the individual merits of it. Yes, it is high risk and there is a greater likelihood of it doing nothing than something. I already bought £1,000 worth at the start of the summer and have made a 70% gain. I have a direct link to the CEO of the company and there is a lot of positivity about what they are doing at the moment. The phone is next to the desk on standby for the, "GET OUT NOW" call
The reality is that I understand risk and, crucially, am happy to regard the money as 'lost' the moment I invest it. In short, I am only gambling with what I am willing to lose.
16 October 2010, 01:42 PM
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Another question, is there a great deal of difference between the Share-Dealing ISAs offered by the various financial institutions. i.e. RBS vs Lloyds vs Interactive Investor, etc...or are they much of a muchness.
FWIW, I expect the account would be used for only this one transaction, I don't plan to become a share dealer
FWIW, I expect the account would be used for only this one transaction, I don't plan to become a share dealer
16 October 2010, 05:22 PM
#22
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I would check the charges from each of the providers - Hargreaves Lansdown seem popular but I think they can be expensive. Avoid banks for no other reason other than principle!
IF and IF the share your talking about can be ISA'd I don't see in what situation you'd pay tax (unless you cark it and you might not care at that point ). I don't know the exact terms as I've only ever had unit trusts and one ETF in an ISA. If ISAs are share based the dividend is paid less the 10% - this can't be reclaimed.
IF and IF the share your talking about can be ISA'd I don't see in what situation you'd pay tax (unless you cark it and you might not care at that point
). I don't know the exact terms as I've only ever had unit trusts and one ETF in an ISA. If ISAs are share based the dividend is paid less the 10% - this can't be reclaimed.
16 October 2010, 05:37 PM
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Dilligaf if I die
The can defo be ISA'd as I know someone who has already done it that way. I already have a share dealing account with interactive investor where I made my initial £1000 investment. I'll look into what deal they have for share dealing ISA's.
The can defo be ISA'd as I know someone who has already done it that way. I already have a share dealing account with interactive investor where I made my initial £1000 investment. I'll look into what deal they have for share dealing ISA's.
16 October 2010, 11:06 PM
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17 October 2010, 11:15 AM
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Surely it can't be illegal for a friend to tell a friend who tells another friend if things went good/bad or indifferent at the office today?
17 October 2010, 11:43 AM
#27
I've been in numerous AIM shares where it's clear that news has leaked before an official news release - if the pre news trading is significant, and the news leads to a dramatic move in the share price, then the FSA may investigate the trades themselves, or if prompted by investors who've lost money.
17 October 2010, 06:19 PM
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