Move shares from dealing a/c to ISA

[granretire]

Not sure whether this is the correct board to post this query on.
I have a tax liability on dividend income. Should I start selling shares that I own in dealing a/cs and buying them in my ISAs? Bed and ISA isn't an option as they are held with different online brokers, and anyway the advantage in costs incurred is minimal by bed and ISA.
Please point me to the correct board if this one is wrong.

[Dod101]

Sounds like an investment strategy, and a sensible one at that. In other words, you are asking if it is a good idea to transfer shares held in a dealing account (where your dividends are unsheltered) into an ISA (where they are sheltered) Of course it is, in almost all circumstances. The only reason to hesitate would be if you are likely to incur a big CGT liability if you sell outside of the ISA to release the funds to make the ISA contribution, because that is what happens. You must sell outside of the ISA and that may incur a substantial CGT liability. If it does, you might want to make the sale over two tax years and so get two allowances instead of one.

Other than that, it is absolutely sensible to get these shares into an ISA and then have no further tax liability to worry about.

Dod

[GoSeigen]

Bank Accounts Savings and ISAs is a better location. Not an investment strategy.

Bed and ISA is exactly what you want to do. A Bed and Isa operation refers to selling a stock outside an ISA and repurchasing in an ISA. The accounts don't have to be held with a single broker. If it's with different brokers you will need to either have a cash buffer so that you can purchase the shares in the ISA while waiting for the sale to settle, or you will need to wait two days for settlement and then transfer the funds and do the purchase. Obviously there is more market risk in the latter.

If you have the cash to do the sell and buy simultaneously then you can contact both buying and selling broker by phone and ask them to allow you to take both sides of the trade at a fixed spread to give the market maker a cut. In my experience the MMs usually take about £50 with the normal telephone trading charge going to each of the brokers. Whether this is cheaper than simply using online trading depends on the spread on the stock, the trade size and the various fees.


GS

[granretire]

Thanks for the prompt response. That is what I thought, but felt there is the stamp duty that should be taken into consideration (and small dealing charges)

[monabri]

Well, the ISA allowance per annum is £20k so that will be the max you can individually squirrel away from the tax man until April 2023.

I would rank and select the shares to be transferred based on their yield and then consider the way to minimise buying /selling fees. Of course, you might wish to take a view on just how secure that high yield might be...it reduces the benefit of transferring to an ISA if the divi were to be culled!


The first £2k of dividends being 'no tax'.

[Dod101]

Thanks for the prompt response. That is what I thought, but felt there is the stamp duty that should be taken into consideration (and small dealing charges)

Sure there are costs involved but on the whole, the freedom from dividend tax (for the foreseeable future) and the freedom to buy and sell CGT free within the ISA is surely worth a modest one off charge.

Dod

[Lootman]

Thanks for the prompt response. That is what I thought, but felt there is the stamp duty that should be taken into consideration (and small dealing charges)

There is also the bid-to-offer spread, since a transfer or bed-and-ISA type deal is actually a sale and repurchase rather than an in specie transfer. Spreads are low for liquid securities but can be significant for smaller companies and some investment trusts.

More generally it can be tempting to put shares that pay dividends into an ISA to avoid the income tax on them. But at some point, if you invest over a long period of time and are successful, you may find that it is actually the CGT savings of an ISA that become worth more than the income tax savings. And at that point you might wish that you had transferred your growth shares rather than your income shares.

[Kantwebefriends]

With the shares in an ISA you need never again worry about reporting their divis or capital gains to HMRC.

[Gerry557]

With the shares in an ISA you need never again worry about reporting their divis or capital gains to HMRC.

This is often a very understated advantage. No hassle of remembering to do the filing on time and getting everything required to fill in the details.

There was a time when the tax return was relatively simple but it got more complicated over time.

The worst bit was being told that I would be fined £100 for late payment for a miniscule amount. I duly sent off my cheque and the second class stamp cost more than the tax.

I have wondered if some allowances are designed to prevent the need for over reporting.

[absolutezero]

With the shares in an ISA you need never again worry about reporting their divis or capital gains to HMRC.

This is often a very understated advantage. No hassle of remembering to do the filing on time and getting everything required to fill in the details.

There was a time when the tax return was relatively simple but it got more complicated over time.

The worst bit was being told that I would be fined £100 for late payment for a miniscule amount. I duly sent off my cheque and the second class stamp cost more than the tax.

I have wondered if some allowances are designed to prevent the need for over reporting.

LOL

I once read a story in the paper where a guy received a bill from HMRC for £0.00.
He sent them a cheque for £0.00 and then received a acknowledgment for £0.00.