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Share Trading Vs Share ISA


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Hey - So the only difference as far as I can see is the fact that you have to pay tax on profits in the regular share dealing account. In the ISA share account you can put up to 20k GBP in there per year and any profits you earn are tax free. This is part of a government allowance. This means that you should use the ISA acct before the share dealing in order to maximise your benefit. 

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3 minutes ago, Fletch said:

The ISA is just a wrapper that protects the investments from UK tax. Other than the funding limitation (£20,000 per tax year) and some restriction on the type of ETFs that can be put in an ISA, they are essentially the same thing.

IG's ISA page: https://www.ig.com/uk/investments/isa

So it would be subject to the same charges and commissions as a share trading account,  but the profits from this are Not taxable, is this correct? Also like standard bank isas any funds within the account are not subject to being locked in the account for a period of time?

 

is this correct, many thanks

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is it 20k funding each year or profit/capital gains?

 

i believe with normal share dealing the first 12.5k of profit is not taxable anyway if you have no other capital gains  elsewhere in the tax year

Edited by DannnoB
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33 minutes ago, DannnoB said:

is it 20k funding each year or profit/capital gains?

 

i believe with normal share dealing the first 12.5k of profit is not taxable anyway if you have no other capital gains  elsewhere in the tax year

20k of funding. And yes, for most people, in the short term it probably won't save you tax, because you wouldn't be earning enough from the shares to liable for it anyway. However, over the course of 10, 15, 20 years of investment, the story might be very different.

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15 minutes ago, BASA said:

So to summarise throughout the year I can put up into 20K nvestment into the account,  by taking money out, putting money back in etc but I am only paying tax on anything over 12.5K

?

You're not paying tax on anything within the ISA. That is fundamentally the point of it. Unless of course the government decides to change the rules at some point in a desperate bid to raise some money.

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21 hours ago, BASA said:

Thanks Fletch, I had done some reading after I posted  so basically, I gather, any profit from up to 20k investment is non taxable at all, 

I did some research on this, a lot in fact and discussed it with my accountant. 

ISA: You can transfer up to £20,000 INTO your ISA in any tax year (April to April). If you take some out then pay it back in, the withdrawal is not included in your allowance. eg you pay in £10,000, you take out £5,000, you can now only put in another £10,000. You cannot also replace the £5,000 you took out in addition to the £20,000 deposit limit. 

If you are in a Fund and Share type of ISA where you can trade and deal, any profit you make is tax free. So, for example you could pay in £20,000 a year for 5 years, and be a mega-successful trader and trade up to £1,000,000 or more (hypothetically) and there would be no tax to pay on your £900,000 gains. None, of any kind. 

Outside of an ISA you are only allowed the Income and Capital Gains allowances that are relevant to that year. Above those all gains are taxed. There is, however, an interesting loophole: If you use Spread Betting (this doesn't apply to CFDs), and if it is not your main source of income, then gains from spread betting can be treated by the Inland Revenue as gambling, and are therefore not taxed. What constitutes "not your main source of income" is the grey area though. If you have a regular job and pay income tax, you can claim that spread betting is secondary. However if you build an account up to a size where you are regularly making more than your salary, the Inland Revenue can, at their discretion, claim that it has become your main source of income, and that you are a professional trader - at which point you might get a pretty big tax bill. So, as long as it's small you can spread bet outside an ISA and put £20,000 into an ISA for CFD trading each year. 

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Do you know if the share trading account has limits on it?

i am getting close to maxing my ISA out for the tax year, so if I have money later in year I will need to invest in Share dealing & just wondering if I can invest in both & there is any limits.

Thanks in advance

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If you buys via the normal share dealing route then any gains are subject to capital gains tax - this tax year you can make gains of £12,300 the rest is subject to taxation at varying rates depending on your tax status - 10% for a basic rate tax payer and 20% for high rate tax status etc - see https://www.gov.uk/browse/tax/capital-gains

You can buy the SAME shares and ETF's within an ISA - its exactly the same as share dealing but you don't pay capital gains 0 its a tax-free wrapper for investments

Your first port of call should be an ISA, then one for your spouse if you have one, then share dealing - Then every year use the share dealing account to fund new ISA(s) contributions

I haven't bought a share or ETF outside of my ISA for the past 10 years - doesn;t make sense tax wise

 

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