Follow this topic
Q&A » ISAs
I am in the progress of inheriting about £120K of investments. These are spread across JPM, M+G and Architas and are mostly accumulation shares. My intention is to retain these as capital growth for maybe 10-15 years. I am a higher rate tax payer. Can these existing investments I own be slowly moved into a stocks and shares ISA at £7.2K a year? Does it make sense to do this?
Thanks,
BH
Report
410Yes, you need to 'Bed & ISA' the investments. You sell your ISA limit each year (or twice that if you have a partner whose ISAs you can also use) and then re-purchase in an ISA. The sale & buy can be on the same day. You will lose the spread on the dealing and also commission and stamp duty, but this is a very sensible plan.
nb your ISA limit is going up to £10,200 from April (it has already gone up if you are over 50).
(You will in theory have to pay CGT on the sale but if you are only selling the ISA amount each year, this should normally be well within your nnual CGT allowance.)
Of course you don't have to buy exactly the same thing in the ISA. Doing this long term shifting will mean that you have a chance to rebalance your portfolio a bit each year. So if you think it is getting top heavy in UK shares, or utilites, or emerging arkets or whatever, sell a chunk of those and buy something else.
Can I do a quick sanity check - do you have any debts apart from a mortgage? If you have, you should consider selling enough to clear these debts.
manzanilla
Posted on 28 December 2009 |
Love 0 loves
Report
0
804BH
If you are a higher rate payer and your wife is a basic rate payer then you need to equalise your incomes using these inheritances. At the very least, she needs to have as much of the share income as possible up to the limit of her basic rate band.
The effective tax rate on dividends up to that limit is 10% against 32.5% in the higher rate band. That saves 22.5%.
The effective tax rate on interest is 20% below and 40% above, saving 20%.
Therefore the dividends should be the higher priority.
It is also a good idea to split assets so that you both have some in order to disinvest an asset faster without incurring CGT if the need arises.
Mike
Posted on 28 December 2009 | Love 0 loves
Report
0Mike - thanks. To be clear though my intention would be to use the investments for capital growth so we wouldn't be taking dividends. So the hit would be sometime in the future as CGT. I have never needed to consider CGT before but I am right in thinking I would likely be best to try and avoid it using ISAs assuming the following? £120K received in 2009 with average growth conditions for 10-15 years and then selling them.
Thanks - BH
Posted on 28 December 2009 | Love 0 loves
Report
410BH
I think you may have not understood about accumulation shares - there is a dividend income here and the fact that it is re-invested is irrelevant - you still have to pay income tax on them! See this for more details: http://www.investmentuk.org/FactSheets/UT/Taxfactsheet.pdf
(In fact I avoid the wretched things like the plague as they give a lot of CGT hassle unless they are in ISAs.)
So your best play is to move most / all of the investments into your wife's name and bed & ISA for you and your wife each year. Doing this routinely should mean no CGT to pay.
manzanilla
Posted on 28 December 2009 | Love 0 loves
Report
0 804BH
If you hang on to shares for years and then cash them in you only get the CGT allowance for that one year and that probably wouldn't be enough.
What Manzanilla and I have been saying is to cash them in gradually utilising each year's CGT allowance and then there will be no CGT to pay.
If you are keeping the cash as cash then you should be moving that into a Cash ISA each as well as the shares into a Stocks & Shares ISA each.
Mike
Posted on 29 December 2009 | Love 0 loves
Report
8There are also other investment vehicles with which you can shield inherited money from the tax-man, such as ITS (Inheritance Tax Solutions) and Enterprise Investment Vehicles. These typically require you to lock the money away for at least two years and they are invested into a diversified portfolio of low risk investments in enterprising or start-up firms. After the two years you can normally transfer the money out into existing tax-efficient savings vehicles gradually utilising your ISA allowance each year for example.
Daxter
Posted on 05 January 2010 | Love 0 loves
Report
Sign in or register to post an answer.
Register with lovemoney.com to start asking and answering questions on Q&A.
Get started nowRegistered already? Great! You can just sign in to ask and answer questions.
Sign in
Retweet
Comments (
Facebook