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Question for IFAs - what's the best thing to put in your ISA tax-wise?

16 replies

digitallyremastered · 14/11/2018 16:40

Should it be an OE investment fund or an investment trust if you're buying both and will exceed 20k? Is it best to put a growth or income fund in there?

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SouthLondonDaddy · 15/11/2018 22:22

I don't understand your question. ISAs are tax free. What do you mean by best "tax-wise"?

digitallyremastered · 15/11/2018 23:06

So if I have a choice of investment types to place into the isa wrapper, how should I choose what to put in it, all other things being equal, just focusing on tax saving? So a growth oriented fund or income one for example?

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SouthLondonDaddy · 16/11/2018 07:17

Still the wrong question! What do you mean by tax wise? There is no tax within an ISA! Dividends and capital gains are all tax free. Outside of an ISA, you may have a preference for investments which reinvest dividends vs those which don't, depending on your tax situations, but within an ISA it's all tax free anyway.

And what do you mean by all other things being equal - what other things?

Growth vs income will depend on your needs and preferences - NOT on tax if you're investing within an ISA.

TetherEnding · 16/11/2018 07:31

Still the wrong question!

Or maybe the wrong interpretation of it? Hmm

OP since your ISA is tax free, this covers cap gains as well as dividends and also cap losses. Therefore, you place in assets / investments that are likely to make the highest gains ( does not matter whether growth or income stocks, or whether OEICS or ITs, but you would avoid those with high risk or loss or relatively low income/growth generation potential (like gold, gilts, cash or high risk innovative finance products with higher than average chance of cap loss).

My pref is for high yield ftse100 equities but your decision is directed be personal circumstances (how long you are happy to leave investment untouched, overall wealth, portfolio balance etc.)

digitallyremastered · 16/11/2018 12:39

Thank you Tether - yes that's absolutely exactly what I meant and wanted to know.
Are you an IFA or an active personal investor?

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FrankIncensed · 16/11/2018 12:53

How about you find an IFA and pay for the advice you are asking for from someone with the relevant qualifications and in full possession of the facts around your finances?

digitallyremastered · 16/11/2018 14:35

Frankly frank there are countless things people ask advice about on here that they COULD pay a professional for - some just as important e.g. medical conditions.
You don't know anything about me or my background as an investor and whether I need to pay £2000 to an IFA or not for advice when I only had one small question regarding tax efficiency and ISAs.

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SouthLondonDaddy · 16/11/2018 16:00

OP, maybe it's just me, but I still do not understand your question.

If the question is whether there is any difference in the tax treatment, within an ISA, of the different investments you can hold in an ISA (shares, bonds, ETFs, funds, investment trusts, income-focused fund vs growth-focused funds, distributing vs accumulating funds (ie fundw hich pay you dividends vs those which reinvest them)), then the answer is a clear no. Tether basically said the same. Which is why I dont understand the "tax-wise" part of the question!

If instead the question is what investments people would recommend for you (the second part of Tether's answer), that's a different question, which has nothing to do with tax.

Are you familiar with the differences between investment trusts and open-ended funds? Morningstar has a simple introduction. www.morningstar.co.uk/uk/news/105931/funds-vs-investment-trusts.aspx/

No one, be they an expensive financial advisor or some random stranger on the web, can recommend anything about asset allocation without knowing about your situation: what other assets you have, invested where, what your risk appetite and time horizon for this ISA is, etc. Is this ISA a rainy day fund that you don't plan on using before a decade? Is it money you might need in the next 18 months? Is it most of your savings? Do you have hundreds of thousands of pounds saved elsewhere? Etc...

FrankIncensed · 16/11/2018 17:50

Exactly I know nothing about you and neither does anyone else here. How are they able to advise what is best in your specific situation. People asking does anyone have any experience of x medical condition is different to I want free financial advice about which specific financial investment is best for me. I understand people asking for free help and advice in a desperate situation which this very much is not.

digitallyremastered · 17/11/2018 11:29

You're both making massive assumptions about me. I am a fairly seasoned investor in some ways (I'm not going to go into details that might out me), but not a professional and had been discussing this issue with someone else and was curious as to opinions.

I am NOT asking for a free IFA session generally. The post was about a specific issue. What is the best type of investment - ALL OTHER THINGS BEING EQUAL to shelter from tax in your ISA. TetherEnding has managed to understand and answer this perfectly, so I honestly think you two are getting muddled by my question because you are seeing things that are simply not there.
So YES thank you I am very au fait with the difference between OIEC and ITs and NO I'm not seeking general IFA style advice on what to invest in.

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digitallyremastered · 17/11/2018 11:32

So for example I wondered if a fund with more focus on income/ higher dividend yield would be better to put in an ISA than one focused on growth.
I suppose we could flip it round and ask which types of investments are most highly taxed if there is variation. Maybe I should post asking a tax accountant or is that not allowed either.

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digitallyremastered · 17/11/2018 11:37

And I completely disagree - people DO post on here about things that are parallel to this ALL the time. Asking about a sports injury for example might not be a desperate or urgent situation, has personal variation and arguably they should go to a physio and pay.
The question here was too minor in my view to justify seeking professional advice or troubling an IFA over. It does not warrant a whole session when you don't already have a relationship with an IFA to call and ask one small question. Likewise with an accountant.
Please don't patronise me and assume I'm just a total clueless idiot - I have a couple of decades of working with accountants, City types and lawyers etc in my professional life.

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SouthLondonDaddy · 17/11/2018 12:42

I'm not making any assumptions whatsoever. I have simply stated two very banal points: that I didn't understand your question about "best tax wise", for the reasons I said, and that no one can give sensible advice about asset allocation without knowing anything about your situation.

That someone has given some kind of "advice" doesn't mean this someone has understood you better than me - it means they simply stated a preference of theirs which may or may not be appropriate for your situation.

It's great you are familiar with the difference between funds and investment trusts, but don't feel offended I asked - how was I supposed to know what you know and what you don't?

Only after your last post do I understand that maybe you meant to ask which investments are taxed the most, and therefore for which investments there would be the greatest difference between holding them in an ISA or outside. Is this your question? By "all other things being equal" do you mean "given two investments which have the same pre tax return"?

If it is, the answer is not straightforward because it depends on your tax situation, on which we know nothing.

For example: what's your tax bracket? Have you already used all your dividend and capital gain allowance? Again: time horizon / risk profile?

In many cases dividends can be taxed more than capital gains, so an investment which pays high dividends is something you probably want to hold in an ISA. But it depends! There is then a separate question of whether, assuming you need a regular income, it's best to focus on high dividend yield, or on high growth and then just sell what you need for income. Different people have different opinions. Terri Smith, the manager of Fundsmith, prefers the latter, for example (plenty of interviews on the matter).

digitallyremastered · 17/11/2018 17:17

Fair point SLD and maybe I worded things badly. I'll look through your reply and post again shortly. Sorry (genuine not sarcastic).

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digitallyremastered · 20/11/2018 14:20

SLD, I read through this properly and wanted to say thank you as it is useful. I can see it IS more complex and does depend on issues around which tax band one is in etc so will seek my accountant's advice instead of 'trying to work it out'.

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SouthLondonDaddy · 20/11/2018 15:06

You're welcome!

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