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What to do for the best

Practical discussions about equity High-Yield Portfolios (HYP) for income
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Tight HYP discussions only please - OT please discuss in strategies
evilbungle
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What to do for the best

#35491

Postby evilbungle » March 1st, 2017, 5:02 pm

Asking for a "friend" who is very keen on building a Hyp portfolio but who is restricted to do so due to limits of money (namely not having much) as a result he has spent years building a portfolio that is probably smaller than many here invest in a month - not after sympathy (for him, obviously not talking about myself :roll: ) but am not really sure what to do about something that has come up.

This friend let's call him goodbungle has always invested his money in an Isa but has now had to leave the country for a few years (for work, not for prison or anything) which has meant that Investing in the ISA is no longer possible. So the question is, should I advise GoodBungle to continue to buy shares outside the ISA wrapper and then when he moves back to the UK to sell them and buy them back into the ISA (Therefore generating triple charges and being liable to taxes on whatever happens whilst they are not protected.) or should he just hold onto the money in cash and put it all in the ISA in two years when back in the UK (Unfortunately it will all fit quite easily into the 20k allowence.)

So I guess goodbungle's question is ¿when you only have a limited amount of funds and no access to tax efficient wrappers is it better to purchase hyp shares and then bed and isa later or just hold the cash until you can invest in an ISA again knowing it will only be 2 years, and we're not talking about that much money anyway?

Thanks Evilbungle - who is definitly not talking about himself as like everyone else here I have giant portfolios worth millions, honest!

Breelander
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Re: What to do for the best

#35503

Postby Breelander » March 1st, 2017, 5:47 pm

evilbungle wrote:Asking for a "friend" who is very keen on building a Hyp portfolio but who is restricted to do so due to limits of money (namely not having much) as a result he has spent years building a portfolio that is probably smaller than many here invest in a month

... So I guess goodbungle's question is ¿when you only have a limited amount of funds and no access to tax efficient wrappers is it better to purchase hyp shares and then bed and isa later or just hold the cash until you can invest in an ISA again knowing it will only be 2 years, and we're not talking about that much money anyway?


If we're not talking about that much money then any tax liabilities (CGT or dividend) should be well within the personal allowances. Some ISA brokers charge a single trade for 'bed-and-ISA' so that cost can be managed too. The main difficulty would be finding a UK broker that can be used from outside the UK. We have a board for that...

Lemon Fool - International & Expat Investors

monabri
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Re: What to do for the best

#35510

Postby monabri » March 1st, 2017, 6:09 pm

Currently the first £5000 (£5k) of dividends is not taxable for a UK resident.Of course, it may change in the future. Here's a link to the official UK Government web page.


https://www.gov.uk/tax-on-dividends/how ... -are-taxed


Tax on dividends from April 2016
You may get a dividend payment if you own shares in a company.
From 6 April 2016, you won’t pay tax on the first £5,000 of dividends that you get in the tax year. This is from 6 April to 5 April the following year.

So, when goodbungle gets back it might not be a problem if the shares are in or out of an ISA. To generate £5k of dividends would require a sizable sum of investment.

However, they might have to declare the dividends from UK investments in the country they are now resident in - they will need to check. Foreign prisons might not be as nice as UK ones! :shock:

tjh290633
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Re: What to do for the best

#35516

Postby tjh290633 » March 1st, 2017, 6:26 pm

evilbungle wrote:So I guess goodbungle's question is ¿when you only have a limited amount of funds and no access to tax efficient wrappers is it better to purchase hyp shares and then bed and isa later or just hold the cash until you can invest in an ISA again knowing it will only be 2 years, and we're not talking about that much money anyway?

Better to buy shares now. If he sticks in cash he is foregoing dividend income, which will compound nicely, and any price rises. He will also suffer any price falls, but they are best ridden out.

TJH


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