Investing outside of ISA wrapper?
Discussion
I've used my ISA limit and still have plenty of spare cash that I would love to be working a littler harder than 1.5-2% in savings accounts.
I'm confused what happens around tax if I put (made up number) £20k into funds in a general trading account and in 1 year I've made 5% so £1000.
Do I pay income tax on that in which case it's interest on anything over my £500 personal allowance.
Or because it's funds is it CGT in which case I'm not taxed on anything up to £11700?
I'm confused what happens around tax if I put (made up number) £20k into funds in a general trading account and in 1 year I've made 5% so £1000.
Do I pay income tax on that in which case it's interest on anything over my £500 personal allowance.
Or because it's funds is it CGT in which case I'm not taxed on anything up to £11700?
There is no income tax on profits from shares and funds. You pay capital gains tax. Its only paid when you actually sell (not on paper profits) and based on the profit you made. You have tax free allowance of over £11k (22k per couple) per year. You can part sell before and after tax year end to split a bigger profit into two.
Just notices some new changes for this tax year. Detailed here.
https://www.which.co.uk/money/tax/capital-gains-ta...
https://www.which.co.uk/money/tax/capital-gains-ta...
sas62 said:
There is no income tax on profits from shares and funds. You pay capital gains tax. Its only paid when you actually sell (not on paper profits) and based on the profit you made. You have tax free allowance of over £11k (22k per couple) per year. You can part sell before and after tax year end to split a bigger profit into two.
This isn't strictly true. If you're buying and selling to profit then you should be paying income tax. If they're investments that you're dealing with then CGT as discussed. Divis/income from the funds/shares are tax free up to £1k.
OK so let's say I go out today (yes it's Saturday I know) and I stick £10k into Finsbury Growth Trust outside of an ISA.
My intention is to just sit back and let it do nothing.
In six months time my £10k is worth £11k (I wish
) and for whatever reason I choose to sell £500 worth of shares and withdraw that money from the investment account as cash.
Does personal savings allowance come into play or is it CGT or both?
My intention is to just sit back and let it do nothing.
In six months time my £10k is worth £11k (I wish
) and for whatever reason I choose to sell £500 worth of shares and withdraw that money from the investment account as cash.Does personal savings allowance come into play or is it CGT or both?
b
hstewie said:
hstewie said: OK so let's say I go out today (yes it's Saturday I know) and I stick £10k into Finsbury Growth Trust outside of an ISA.
My intention is to just sit back and let it do nothing.
In six months time my £10k is worth £11k (I wish) and for whatever reason I choose to sell £500 worth of shares and withdraw that money from the investment account as cash.
Does personal savings allowance come into play or is it CGT or both?
Cgt. My intention is to just sit back and let it do nothing.
In six months time my £10k is worth £11k (I wish
) and for whatever reason I choose to sell £500 worth of shares and withdraw that money from the investment account as cash.Does personal savings allowance come into play or is it CGT or both?
bhstewie said:
hstewie said: OK so let's say I go out today (yes it's Saturday I know) and I stick £10k into Finsbury Growth Trust outside of an ISA.
My intention is to just sit back and let it do nothing.
In six months time my £10k is worth £11k (I wish) and for whatever reason I choose to sell £500 worth of shares and withdraw that money from the investment account as cash.
Does personal savings allowance come into play or is it CGT or both?
I’m pretty sure this would be subject to CGT, but in the scenario above your gain is just £45 so the tax would be less than £10, even if you’ve already used up your annual CGT allowance.My intention is to just sit back and let it do nothing.
In six months time my £10k is worth £11k (I wish
) and for whatever reason I choose to sell £500 worth of shares and withdraw that money from the investment account as cash.Does personal savings allowance come into play or is it CGT or both?
Badda said:
This isn't strictly true. If you're buying and selling to profit then you should be paying income tax. If they're investments that you're dealing with then CGT as discussed.
Example/reference? Never heard of this before."If you're buying and selling to profit" - as opposed to what, exactly?
silentbrown said:
Example/reference? Never heard of this before.
"If you're buying and selling to profit" - as opposed to what, exactly?
There’s certainly a different treatment between investors buying and selling investments occasionally and someone actively trading on a regular basis."If you're buying and selling to profit" - as opposed to what, exactly?
sidicks said:
There’s certainly a different treatment between investors buying and selling investments occasionally and someone actively trading on a regular basis.
All the info I've seen says HMRC won't classify an individual buying and selling shares as "trading" unless they're doing it commercially. It's considered either investment or speculation, both of which mean CGT?silentbrown said:
All the info I've seen says HMRC won't classify an individual buying and selling shares as "trading" unless they're doing it commercially. It's considered either investment or speculation, both of which mean CGT?
IIRC it's a bit like a car dealer, or Art Dealer. They buy and sell assets for a living. Their profits aren't treated as capital gains/investment profits but as profits from a trading activity.How does HMRC decide what are profits from investments or profits from trading? They look at frequency of trades, the length of time an asset is held and the overall set-up arrangements. So if b
hstewie was the Owner of bhstewie Wealth Management and was day trading and that was his main or only activity, then HMRC might argue that it was profits from trading. OTOH if he bought shares once a week then I think it's unlikely that he would be considered a professional trader.Same with cars - if you're selling one car every 3 months it's not likely that you're a trader. if you're selling 2 a week, and have several in stock which you are turning over every 60 days, and are offering worthless paper warranties, chances are you're a trader.
ETA: Basically - Yes you're right. i think badda was giving a remote but possible scenario, rather than how HMRC usually interpret it.
Badda said:
sas62 said:
There is no income tax on profits from shares and funds. You pay capital gains tax. Its only paid when you actually sell (not on paper profits) and based on the profit you made. You have tax free allowance of over £11k (22k per couple) per year. You can part sell before and after tax year end to split a bigger profit into two.
This isn't strictly true. If you're buying and selling to profit then you should be paying income tax. If they're investments that you're dealing with then CGT as discussed. Divis/income from the funds/shares are tax free up to £1k.
Any growth is subject to CGT and any income (dividends) is subject to income tax. CGT becomes payable when you dispose of the share and Income tax becomes payable in the tax year it is received (even if you have it reinvested - rather than taking it).
As Derek said, you can earn £5,000 a year in dividend income tax free (dropping to £2,000 on April 6th). The £1,000 allowance is for tax free interest payments.
So, you can make (by selling shares) an annual capital gain (rise in share price) up to your CGT allowance level each year without paying any tax. Dividend income is, however, taxable.
JulianPH said:
So, you can make (by selling shares) an annual capital gain (rise in share price) up to your CGT allowance level each year without paying any tax. Dividend income is, however, taxable.
Worth pointing out you have to declare to HMRC any assetts disposed of with a value exceeding four times the annual CGT allowance per year EVEN though you may not have made a capital gain exceeding the annual allowance.What are the tax implications if its via spread betting? Say £5k of already taxed income is invested into spread betting company and you bet on the same shares you might otherwise choose as a standard share purchase.
If gains are made how are they declared on self-assessment (if at all) and whilst the headline they are tax exempt, does a declaration need to be put into SA and signed to declare as gains from spread betting rather than share gain/dividend income?
If gains are made how are they declared on self-assessment (if at all) and whilst the headline they are tax exempt, does a declaration need to be put into SA and signed to declare as gains from spread betting rather than share gain/dividend income?
JulianPH said:
Badda said:
sas62 said:
There is no income tax on profits from shares and funds. You pay capital gains tax. Its only paid when you actually sell (not on paper profits) and based on the profit you made. You have tax free allowance of over £11k (22k per couple) per year. You can part sell before and after tax year end to split a bigger profit into two.
This isn't strictly true. If you're buying and selling to profit then you should be paying income tax. If they're investments that you're dealing with then CGT as discussed. Divis/income from the funds/shares are tax free up to £1k.
Any growth is subject to CGT and any income (dividends) is subject to income tax. CGT becomes payable when you dispose of the share and Income tax becomes payable in the tax year it is received (even if you have it reinvested - rather than taking it).
As Derek said, you can earn £5,000 a year in dividend income tax free (dropping to £2,000 on April 6th). The £1,000 allowance is for tax free interest payments.
So, you can make (by selling shares) an annual capital gain (rise in share price) up to your CGT allowance level each year without paying any tax. Dividend income is, however, taxable.
Badda is introducing confusion. Buying and selling shares will be subject to CGT - in my 12 years as a stockbroker with clients who traded at many different levels, from casual to full-blown day traders, none ever found themselves subject to income tax on trading profits.
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