Stocks and Shares ISA Question

[torqueofthedevil]

My general investment strategy was to aim for growth initially and move to dividend investing in later years.

I know CGT isn’t paid on any growth on share price increases within a s&s isa and no tax on dividends.

However if for example in 10 years you had £200k invested in 10 s&s isas, now worth £400k and you decided to sell all those shares to buy different shares - would the process of selling them take all that money out of the isas and effectively close them?

I.e when buying £400k worth of new shares would only £20k be in a tax free isa (that years allowance)? Or is there a better way of retaining the tax benefit?

[DoubleSix]

No.

In both scenarios it would be free from tax. It’s only the process of removing money from the ISA and subsequently reinvesting outside of the ISA that would attract tax on sale.

[torqueofthedevil]

Ah ok brilliant. I just thought the “sell” would essentially extract all the cash out and “close it” somehow. Thank you.

[DoubleSix]

When you sell, the proceeds remain in the ISA unless you withdraw them. Typically that’s where people tend to mess it up…

Have a read up on Flexible ISA as also relevant.

[MrBen.911]

As noted, when you come to sell the shares, ensure you sell them in exchange for cash within the ISA, rather than actually withdraw funds from the ISA. The options to do so are differently worded on different platforms, so I can see how people go wrong here, so double check!

[Philvrs]

Also in your example I don’t understand why you would have 10 s&s isa accounts, just hold one with the £200k in.
You would have a management/account/platform fee for each vs one.

[Mr Pointy]

Philvrs said:

Also in your example I don’t understand why you would have 10 s&s isa accounts, just hold one with the £200k in.
You would have a management/account/platform fee for each vs one.

Hopefully he hasn't opened 10x ISAs with £20k in each.

[Simpo Two]

Philvrs said:

Also in your example I don’t understand why you would have 10 s&s isa accounts, just hold one with the £200k in.
You would have a management/account/platform fee for each vs one.

Some people think you have to open a new ISA each year, much as you'd open a new bank account. They don't realise that an ISA is just a big elastic bag that you can keep expanding, the only limit being the £20K you can add each year.

[torqueofthedevil]

Simpo Two said:

Philvrs said:

Also in your example I don’t understand why you would have 10 s&s isa accounts, just hold one with the £200k in.
You would have a management/account/platform fee for each vs one.

Some people think you have to open a new ISA each year, much as you'd open a new bank account. They don't realise that an ISA is just a big elastic bag that you can keep expanding, the only limit being the £20K you can add each year.

This was exactly my thinking! Glad you answered it because I was going to ask this very question but wasn’t sure how to articulate it!

And to answer another poster - no I only have one isa!

[Bobtherallyfan]

These a very good reason to have more than one ISA.. the £85K protection limit.

[Simpo Two]

torqueofthedevil said:

This was exactly my thinking! Glad you answered it because I was going to ask this very question but wasn’t sure how to articulate it!

Bobtherallyfan said:

These a very good reason to have more than one ISA.. the £85K protection limit.

With an S&S ISA containing funds, shares etc invested all over the world?

[SV_WDC]

Bobtherallyfan said:

These a very good reason to have more than one ISA.. the £85K protection limit.

Protection is only eligible on current, savings accounts, cash ISA & fixed-term deposits

So S&S ISA with the funds invested in the market are not covered. The exception (I believe) would be if you are holding cash in the account

[trickywoo]

SV_WDC said:

Protection is only eligible on current, savings accounts, cash ISA & fixed-term deposits

So S&S ISA with the funds invested in the market are not covered. The exception (I believe) would be if you are holding cash in the account

I don’t think that’s the case.

My understanding is that s&s is protected if the ‘hosting’ company fails. In other words the platform and not the fund itself.

You are still fully exposed to the market.

As the host will be regulated I’d question the importance of S&S coverage because a “run” is much less likely but I suppose if you are heavy in in-house funds it might be a worthwhile consideration.

[xeny]

trickywoo said:

My understanding is that s&s is protected if the ‘hosting’ company fails. In other words the platform and not the fund itself..

That isn't the FSCS £85K limit though.

I aim to keep two platforms live, simply so if one has issues, I can live off the other one in the meantime. Trying to keep equity ISAs under £85K is a path to administrative insanity as your net worth grows.

[Bobtherallyfan]

SV_WDC said:

Protection is only eligible on current, savings accounts, cash ISA & fixed-term deposits

So S&S ISA with the funds invested in the market are not covered. The exception (I believe) would be if you are holding cash in the account

Not my understanding..if your Stocks and Shares ISA or SIPP provider goes bust your money and assets are protected by the Financial Services Compensation Scheme (FSCS) if the provider is a firm regulated by the Financial Conduct Authority (FCA). The primary protection you enjoy is that the FCA forces authorised firms to separate their money and assets from your money and assets, but if there's a shortfall the FSCS steps in as a last resort up to a value of £85,000. Basically the system relies on regulatory safeguards.

[Simpo Two]

SV_WDC said:

Bobtherallyfan said:

These a very good reason to have more than one ISA.. the £85K protection limit.

Protection is only eligible on current, savings accounts, cash ISA & fixed-term deposits

So S&S ISA with the funds invested in the market are not covered

And why would they be? Why should the UK Government make good someone's losses if they decide to invest in Bolivian gumbo-bean futures?

IMHO the £85K thing is for cash in banks, which is not investing but saving.

[trickywoo]

Simpo Two said:

SV_WDC said:

Bobtherallyfan said:

These a very good reason to have more than one ISA.. the £85K protection limit.

Protection is only eligible on current, savings accounts, cash ISA & fixed-term deposits

So S&S ISA with the funds invested in the market are not covered

And why would they be? Why should the UK Government make good someone's losses if they decide to invest in Bolivian gumbo-bean futures?

IMHO the £85K thing is for cash in banks, which is not investing but saving.

The FSCS is not underwriting anybody’s investment risk but they are guaranteeing the provider if they are registered.

This applies equally to cash, cash isa, S&S isa, SIPP https://pensioncraft.com/are-investments-guarantee...

[trickywoo]

xeny said:

Trying to keep equity ISAs under £85K is a path to administrative insanity as your net worth grows.

Agreed. You would also potentially miss out on some big management fee savings you get with larger amounts.

There is no reason any of the established players in the UK are at risk of catastrophic failure. Significantly less risk than a traditional run on any given bank.

[stuthemong]

My understanding is that If you have shares in a ISA, your protection of the platform going bang is that, (provided you’re using a reputable platform, which almost the big name ones are), YOU own the shares invested, not the platform. So if the platform goes bang it’ll be annoying and a bit of a wait, but every share you own will come back to you.

If the company you own shares in goes bang, your investment just cratered to £0 and you lose your money, FCSC will not help you. You made a bad bet, it’s on you.

The only way FCSC would be relevant is if in a platform you sold your shares and had a lot of cash there and then the platform collapsed. Firstly, client money should be ringfenced from platform operations side so if company is reputable you should be fine, but if not and they went rogue and broke FCA rules and used your money to try and stay afloat and lost it THEN 85k would be protected. This is why using sensible big name trusted platforms is sensible, FTX bitcoin collapse was the exchange basically run by idiots, mingling client funds and using them for operations and then being general tts. If you use HL/adrbn/barclays etc etc. risk to you of the platform going down is miniscule IMO, it’s not like holding cash in a bank.

Interested in other peoples views though in case my understanding of not correct!

[Simpo Two]

stuthe said:

My understanding is that If you have shares in a ISA, your protection of the platform going bang is that, (provided you’re using a reputable platform, which almost the big name ones are), YOU own the shares invested, not the platform. So if the platform goes bang it’ll be annoying and a bit of a wait, but every share you own will come back to you.

If the company you own shares in goes bang, your investment just cratered to £0 and you lose your money, FCSC will not help you. You made a bad bet, it’s on you.

That is my understanding too. I really don't see what the £85K FSCS limit has to do with a platform provider, hence my thought 'bobtherallyfan' has it confused with cash ISAs.