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Post by yorkshireman on Feb 21, 2014 14:08:02 GMT
A basic rate taxpayer gets no income tax benefit from an ISA... I'm no expert, but I believe the above is true only where the income results from dividends. As jamesfrance has stated in the previous message, if the income is derived from interest then there is a tax benefit. In plain English, no financial jargon, does that mean that you pay tax at 20, 40, 45 or 50% depending on your income / circumstances, on investment funds, investment trusts, unit trusts etc. in an ISA and a cash ISA is the only true tax free account?
If so, isn’t the following statement from a well known fund shop / investment platform misleading to say the least: “This tax year you can shelter up to £11,520 from tax by investing in an ISA.”?
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Post by bracknellboy on Feb 21, 2014 14:31:00 GMT
I'm no expert, but I believe the above is true only where the income results from dividends. As jamesfrance has stated in the previous message, if the income is derived from interest then there is a tax benefit. In plain English, no financial jargon, does that mean that you pay tax at 20, 40, 45 or 50% depending on your income / circumstances, on investment funds, investment trusts, unit trusts etc. in an ISA and a cash ISA is the only true tax free account?
If so, isn’t the following statement from a well known fund shop / investment platform misleading to say the least: “This tax year you can shelter up to £11,520 from tax by investing in an ISA.”?
No. I think what this little ding dong is alluding to is dividend tax credit stuff. And I wold have to go back and look this up to be doubly sure, but if one person is claiming there is no tax benefit for shares, and sassuming some grounds for that, I think this is referring to how company dividends are distributed as if tax was pre-paid on them, and therefore if you are a basic rate taxpayer there is no difference to what you would received whether you hold those inside a tax free vechicle or outside. If on the other hand you are a higher rate taxpayer then you WOULD in the normal course of events be subject to further tax on those dividends, but if they are inside an ISA (or pension come to that) they are shielded from tax. Of course any transactions within an ISA are also shielded from any capital gains that might otherwise be due.
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Post by Duane Dibley on Feb 21, 2014 14:34:59 GMT
You don't pay any tax, capital gains or income, on funds held in an ISA.
That may not be all that beneficial to basic-rate tax payers who hold equities but don't want to crystallise large capital gains, but it still makes things easier as you don't have to worry about paperwork or reporting it to the taxman, he's not interested in ISA's at all.
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jimbo
Posts: 234 
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Post by jimbo on Feb 21, 2014 14:42:23 GMT
Not quite correct. You pay the standard rate dividend tax 'credit' on income received from investments within an investment ISA, but as Bracknellboy says, if you're a higher rate taxpayer, you don't pay any further income tax.
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Post by Duane Dibley on Feb 21, 2014 15:09:53 GMT
Not quite correct. You pay the standard rate dividend tax 'credit' on income received from investments within an investment ISA, but as Bracknellboy says, if you're a higher rate taxpayer, you don't pay any further income tax. Don't agree with that. The 10% tax credit is just that, a tax credit, it's notional and not reclaimable, by anyone, anywhere. It's just a red herring. There's no tax payable in an ISA.
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oldgrumpy
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Post by oldgrumpy on Feb 21, 2014 16:06:35 GMT
I've been following all this carefully, thank you. Looking at my position it seems to me that possibly getting towards borderline on paying 40% tax, it is probably best to buy an income ISA especially if the FTSE takes a dip before April 6. Willis Owen/Cofunds control my previous ones, so I will pay no initial fees. New rules confuse me. Any comment?
OldG
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Post by Duane Dibley on Feb 21, 2014 16:33:41 GMT
I've been following all this carefully, thank you. Looking at my position it seems to me that possibly getting towards borderline on paying 40% tax, it is probably best to buy an income ISA especially if the FTSE takes a dip before April 6. Willis Owen/Cofunds control my previous ones, so I will pay no initial fees. New rules confuse me. Any comment? OldG If indeed you are a higher rate tax payer then may be even more tax efficient to invest in a pension instead. Just to complicate things like.
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oldgrumpy
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Post by oldgrumpy on Feb 21, 2014 16:37:08 GMT
Caratacus
Aaargh! I'm already drawing two - I'm not just old and grumpy, I'm an old grumpy f**t!! 
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Post by yorkshireman on Feb 21, 2014 17:36:02 GMT
I've been following all this carefully, thank you. Looking at my position it seems to me that possibly getting towards borderline on paying 40% tax, it is probably best to buy an income ISA especially if the FTSE takes a dip before April 6. Willis Owen/Cofunds control my previous ones, so I will pay no initial fees. New rules confuse me. Any comment? OldG If indeed you are a higher rate tax payer then may be even more tax efficient to invest in a pension instead. Just to complicate things like. I’m sure everyone who has commented has done so in good faith but the variation in answers highlights the unnecessary complexity of ISAS and financial products in general.
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Post by bracknellboy on Feb 21, 2014 18:00:56 GMT
Actually, I think there are no variations in answers. Just in expressions :-) I have to assume that Dave339's comment which started this (no tax benefit etc.) was an ambiguous comment aimed at equity based): even if taken at face value, I think its the only one which is actually 'wrong'. All other statements in fact amount to the same thing: peep's are aruguing over semantics. Jimbo's point is that you pay the dividend tax credit; Caractus is simply making the point that you don't actually 'pay it' in the sense that you never receive it, whether inside or outside an ISA. I prefer Caractus's take, but that doesn't really make Jimbo's incorrect: It amounts to the same thing: your dividends are always subject to that tax "credit", and therefore from a dividend income point of view, tax free wrappers only confer a benefit to those who are higher rate taxpayers who would otherwise be subject to a tax charge.
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JamesFrance
Member of DD Central
Port Grimaud 1974
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Post by JamesFrance on Feb 21, 2014 20:46:23 GMT
When we had peps before Brown interfered the dividend income came with a 20% tax credit which was refunded before the income was paid out to us. The peps were truly tax free which was changed when Brown screwed private sector pensions.
When we moved to France we were able to liquidate all peps and isas which don't work there, without any capital gains tax, so as to invest in the tax efficient Assurance Vie. Looking back now we would have been better paying the French income tax, as the performance of what we sold would have been far better than the Blevins Franks offering which came with considerable charges and invested in Funds with far inferior performance.
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Post by Duane Dibley on Feb 24, 2014 18:36:05 GMT
Can't agree with that either. An ISA is just a tax-wrapper (as is a SIPP) and as such couldn't be much simpler. There's an annual subscription limit, and that's about it. No tax to pay, no maximum values, no records to keep, no tax returns to file, no nothing. Most providers don't charge any extra for holding the investments in an ISA and even for basic rate tax-payers I can't see any good reason for for not holding your investments in an ISA, annual limits aside. Heck, you don't even need to pretend to be a second-hand car salesman. How much simpler do you want?
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Post by webbski9 on Mar 30, 2014 11:02:14 GMT
We now have regulation and next year ISA,s to wrap p2p loans in.This relatively new lending method is becoming mainstream.
I would suggest spreading your money between ,say,FundingCircle, FundingKnight, Assetz and Isepankur.
Good Luck
webbski9
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shimself
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Post by shimself on Apr 2, 2014 12:03:34 GMT
When we moved to France we were able to liquidate all peps and isas which don't work there, without any capital gains tax, so as to invest in the tax efficient Assurance Vie. Looking back now we would have been better paying the French income tax, as the performance of what we sold would have been far better than the Blevins Franks offering which came with considerable charges and invested in Funds with far inferior performance. Do you know, just the same with Sp****m. Are you with S*B previously I*I? The doziest bunch I have ever encountered.
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JamesFrance
Member of DD Central
Port Grimaud 1974
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Post by JamesFrance on Apr 3, 2014 13:06:51 GMT
shimself I sent you a pm about this as I didn't recognise the names with asterisks. Maybe you missed it.
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