just about to start..... UK Shares Isa tax question

[paul2129]

Hi guys, I was reccomended to join here when I accidentally joined a forum that doesn't really serve the UK, they told me about this forum, and I must say it looks really good

so, I've played for the last 9 or 10 years on various fantasy traders and learnt some important lessons, I feel like I'm set up to try some real trading, in a carefully considered way of course, my issue is not so much with picking the stocks, but with the basic operation of the trading account. So far, I opened up a Cash ISA, used the end and then start of the tax year to pay in two allowances, and I've applied to iWeb to transfer that ISA to a Stocks/Shares Isa, I have list of fairly well researched stocks, so am ready to dip a toe in the water.

I'm a higher rate tax payer, and it seems I will avoid paying tax on any gains due to the nature of the ISA account. I'm concerned that I don't make any incorrect movements of funds that could leave me liable to tax, I guess this includes when I come to (hopefully) draw some gains from the account

so, the basics as I understand them, once funded, the ISA Shares trading account will contain the funds and be ready to purchase stocks. Whilst I'll be taking a step by step approach to this, lets just assume that the total of the funds was invested into 10 sets of shares containing equal value each. so, the shares are bought at which point (if it works like the fantasy traders) it will show the value of those shares in the account, and the fact that there's (basically) no cash funds left available. then, imagining that one of the companies for which I hold £4000 in shares was subject to an increase of 50% (for talking sake), then the value for that company will be £6000, so I can draw on the £2000 profit, or indeed any amount including the total value of that company or any others in my portfolio, and once sold, that value will appear back as cash (not sure if that's the correct term) and show on the account as an amount available to reinvest or pay to any alternative bank account such as my regular current account ? how correct am I so far ?

Is there anything more technical about this ? and regarding tax, as long as the share account is funded by an ISA and is within the ISA allowance for that year, in terms of new funds paid into it, am I safe for avoiding tax on any gains ? ...... and I don't need to consider anything about my shares when it comes to my company accounts ?

Many Thanks for your help

I'm sure that questions like these are easy and obvious to yourselves, you're experienced, but believe me, while theres almost endless information online, the answers to some specific questions are impossible to find, so I just want to say how much your help is appreciated !


Paul

 

[malaguti]

You're correct Paul, there is nothing more technical than what you've described
UK tax law permitting: your ISA allowance is exempt, including any interest, or dividends received as a result of any investments you may have made under the umbrella of your ISA allowance. being exempt, you do not have to notify anything related to the ISA to HMRC.

your company accounts are subject to corporation tax (depending on the company status (limited vs "trading as"), your ISA is personal tax, so they are again unrelated.
it doesn't mean you cant also invest under your company accounts, but there will be no "ISA" to cover you

as you've stated, as long as you are within the allowance each year
open as many as you can, your spouse, kids etc but just invest wisely!

depending on your broker, will determine precisely what is at your disposal to invest in
theoretically you can invest in foreign shares, providing they are listed under recognised exchanges, however your broker may not offer these, so my advice might also be to just check how good the broker is
I was once with iweb and moved my money when i realised they couldn't offer what i was looking for, so just a consideration

if you have any other questions, feel free to ask
when you've got your head around the ISA, my next advice would be to look at a SIPP, which also carries generous tax advantages

 

[Atilla]

May I just clarify that you don't need to necessarily open a 'new' ISA account but add to your existing ones as long as you don't exceed the existing allowance for that year per individual.

 

[NVP]

and of course you have to make some money ....always more challenging than the tax complications.....

 

[paul2129]

thank you so much for your replies, I'm sure that this will all fall into place in time, I guess I'll learn with experience and will expect some mistakes and problems along the way, I was just concerned about tax implications, it's hard to believe that the tax man will let you earn from this and not pay tax on profit..... rather good point made though, I should worry about the profit first

I do tend to over analyse things, but I guess you can never be too careful, and clearly, money is at risk here. I also don't know anyone around me who can help to advise or mentor me, so I'm sure I'll have some further slightly crazy questions to ask.

I've a fresh portfolio just opened in a fantasy trading app, which I'm hoping will start to indicate the likely direction of my portfolio when it's opened in the next number of weeks, testing the water and hoping to not fall in head first before I've learnt to swim !

 

[paul2129]

Ok, my learning process has started, I'm sure you'll laugh at how green I am, I now have my stocks and shares ISA, which had transferred funds available to use. Now, over the years that I've played the fantasy traders, I've had stocks from various countries, many of my favourite stocks have been US companies, so in trying out the functions of the online trading platform I notice that I should fill in a form W-8BEN, and that there's a fairly heavy tax on any profit that I might make, can anyone clarify the following :

Is the tax taken as a percentage of capital gain, on all profits produced by those stocks ?

How is the tax paid on profit ?

Is it normal or usual for someone in UK to trade US stocks ?

should I concentrate initially in making an 'all UK' portfolio ? what would you recommend ?


many thanks

Paul

 

[malaguti]

Ok, my learning process has started, I'm sure you'll laugh at how green I am, I now have my stocks and shares ISA, which had transferred funds available to use. Now, over the years that I've played the fantasy traders, I've had stocks from various countries, many of my favourite stocks have been US companies, so in trying out the functions of the online trading platform I notice that I should fill in a form W-8BEN, and that there's a fairly heavy tax on any profit that I might make, can anyone clarify the following :

Is the tax taken as a percentage of capital gain, on all profits produced by those stocks ?

How is the tax paid on profit ?

Is it normal or usual for someone in UK to trade US stocks ?

should I concentrate initially in making an 'all UK' portfolio ? what would you recommend ?


many thanks

Paul

Hi Paul, the W-8BEN is used so that you can inform the IRS that you are a foreign citizen and are exempt from US tax. confirm with your broker. if you don't fill this in, THEN you will be taxed and then you make adjustment on your own UK self assessment.
like i say, you need to fill this in to avoid the tax and not have to do anything for HMRC

 

[paul2129]

ok, thank you, good to know, but for now, I'm sticking to trying UK stocks. I'll try US perhaps when I've exhausted options for UK

thanks again

 

[Nowler]

Tax deferral wrappers should officially be recognised as the 9th wonder of the world! Just after compound interest

Happy investing!