CGT strategy - investment account to ISA.

[Panamax]

Our illustrious government has slashed the CGT allowance for 2023/24 and it reduces again to £3,000 next year.

Question: Is it worth paying some 10% CGT to transfer (sale and repurchase) an investment into ISA?

The particular taxpayer pays no income tax on the small dividends so there's no income tax advantage in ISA; only removing future gains from the grasp of HMRC.

[PM3]

Even at the point the allowance is 3,000 you would still need to gain 15% on a 20K investment in a year to breach the allowance ( and obviously 30% this tax year ) . For me I'll happily risk some tax liability at 10% if only I could get the >30% gain this year , and the 15% next .
Ignoring what the next loony labour gov will raid on my GIA ..... I still rue the days in the past I didn't use my entire ISA allowance every year.
Anyway, that's the way I'm going for the foreseeable

Edited by PM3 on Sunday 23 April 08:38

[bompey]

Surely you should be maxing your ISA each year, so if you have any unused allowance move any other investments into it. Obviously not pensions.

[Simpo Two]

bompey said:

Surely you should be maxing your ISA each year, so if you have any unused allowance move any other investments into it.

The issue here would appear to be that the other investments would produce an CGT liability if sold, which they would have to be to move them into an ISA.

I suppose it's a 'How many years to recover the 10%?' question.

Edited by Simpo Two on Sunday 23 April 10:55

[Panamax]

Simpo Two said:

I suppose it's a 'How many years to recover the 10%?' question.

Yes, that's the nub of it, and i think it's a matter of gut feel rather than an arithmetic answer. And then there's the age-old problem that when you lose 10% (pay CGT) you need future gain of 11% just to get back where you started. But that's not simple gain of 11% - it's got to be gain of 11% over and above the gain that would have arisen anyway outside the ISA.

So it seems to be a bet on how long the value of CGT relief inside the ISA will take to get back to square one before the ISA benefit starts to kick in. And the value of that CGT relief isn't very much for a 10% taxpayer so will take many years to work through..

I find it a tricky question to resolve under these very marginal conditions.

P.S. Yes, if you're a higher rate tax payer age 30 it will probably make sense to pay a modest amount of tax to move things from investment account into SA. But slashing of the annual CGT allowance makes it much harder to suppress that "modest amount of tax".