Investment & Investing

They can come after me. The piddling amount I earn in interest wouldn't cover postage of the tax bill.

What I don't understand is where I'm being taxed when I use an ISA cash product versus a Bonus Saver cash product.

Because you've already paid tax on the cash that you've transferred into your cash or S&S ISA?

I did self assessment a couple of times to cover some freelance work and didn't have to declare any interest or dividend payments that were inside my ISAs.

how do they factor in how much interest you earned into your personal allowance if you don't do a tax return?

I think people are doing it even with ISAs filled for this year. This is my understanding of people's logic

Person A has £100 outside an ISA, £40 of which is gain. If they sell and rebuy that £100 now instantaneously, they are paying less tax that way when they eventually close out the position (Say at £150 in a further 5 years time).

From Sept** will be paying higher CGT. Definitely on the £150-50, possibly at your marginal tax rate, but you've realised £100-60 of gain at 10% or 20%.

If you did nothing in this tax year, you'd be into higher tax on the whole gain £150-60 at the end

** edit, likely, and will be from April 25

The banks have to report to HRMC all the interest paid and then they work it out. It was in the financial year 2022/2023 that I went over the limits, this tax year my personal allowance was adjusted and the form stated the reason was for the interest I earned.

oh, nice one. So if you don't need to do a tax rtn for any reason other than interest earned over the allowance, you still don't need to do one?

Nope, HMRC say on the below post that if you don’t need to do a tax return, then you don’t need to do one for tax on interest earned on savings:

https://community.hmrc.gov.uk/customerforums/pt/f58be9bc-b471-ed11-97b0-00155d9c7b3d

This doesn't work because it doesn't change the cost basis for your section 104 holding due to the bed and breakfasting rule. You need to sell outside and buy inside an S&S isa to
launder your capital gains this way.

I'm not sure I understand the point other than to realise the profit in this year and so guarantee being charged at the current cgt % for this year but not sure if that would be the case

so I book the profit of 100k this year and pay £16500 in tax on the assumption that otherwise I might pay more?

Correct

So, basically, the banks grass us up and HMRC will bill us whatever is required and I still don't need to care? Other than regretting not using an ISA instead of a bonus saver in the first place?

bed and breakfasting rule

You can sell and wait for 30 days to rebuy, or change the asset, though

Sure (it was specifically the sell and rebuy instantly part in the OP I was commenting on)

Thanks. I am on the HMRC website and don't get it from reading their guide.
However, looking at your comment, if you bought and resold instantly within 30 days (say in 2024), whenever you eventually close out the position, your original purchase price (say from 2002) prior to bed & breakfasting is the cost for Cgt purposes.

I never knew this. Don't think I've ever triggered it but never been asked on a tax return done through accountancy if I did anything within 30 days that I can recall.

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That is the relevant section: You have some existing shares with some cost basis then you sell some and buy some (a bit later). To calculate the gain you have to identify "which"
shares you sold, done by the rules in that order. Equally, if you end up at the end with some shares remaining you need to calculate the new cost basis for those shares for when you need to calculate any gain the next time you sell.

I suspect it is this latter that many get wrong.

Why are they doing this?

Basically the reason @Tenderloin states above

You are sat on 20k of capital gain this year. If you sell in this tax year, pay CGT at 0% for your CGT allowance then either 10% or 20% on the next bit, or a mix, dependent on your income.

If you kept it into next year, likely to have no CGT allowance, and will be 20/40/45% on the gain.

This year, you then reinvest the net proceeds and any gain from then onwards will likely be at the new rates

But as we was shared last week, can't rebuy the same asset within 30 days if trying to do this

£225 in sweet PBs

I keep thinking about the bed & breakfasting. Is that common knowledge? There must be so many people doing it this year, not knowing it's a thing and when they do a tax return it doesn't ask for what they did with the proceeds

I think it is common knowledge amongst those people who do tax planning.

I recall it used to be a bigger thing. They brought in the 30 day rule during Thatcher's time, 40-odd years ago. Before then you could sell an asset on one day and buy it back the next morning to reset your capital gains - hence the name.

Nice. No text messages but I can usually tell if I've won something by looking at the future bond record or for other weird transactions.

However I can't check mine right now. Tried first thing this morning and it said my PIN was locked (I never normally need it to login) but eventually got that sorted over the phone.

Both website and app now just fall over with a "Something's gone wrong" whenever I try to login. Will leave it a few hours and try again. Guess there's lots of people all trying to check the same things, or selling some PBs to pay for scalpers for their overpriced Oasis tickets.

[EDIT] £100 for me, £50 for MiniGB.

I have an extra chunk for Oct/Nov/Dec before it gets dumped into the mortgage before the end of the year so hopefully I'll get a bit more in the next 3 months. Putting it into the mortgage straight away would probably save me more money than I'll win on PBs but there's always that extra chance (and the difference is less than the amount I spend on beer so it's just a rounding error to me).

I just use the app on phone, press a button and tells you first thing

I use the official app but was locked out of it this morning. All fixed now though (see edit above).

The theroetical benefit of the ISA is that once the money is in the ISA, every year of gains/interest will be tax free afterwards (assuming Labour don't move the goalposts). The interest on your savings accounts (or gains on stocks and shares) outside an ISA would be taxable every year.

If your savings are pretty static and you know the level of interest you are generating you might not be worried. If you are looking to increase your savings then getting it into a tax-sheltered ISA might be beneficial. For stocks and shares its a bit of a no-brainer because why run the risk of getting taxed when you don't need to (again, assuming Labour don't change the rules)? But for cash savings products its a bit more complicated because the bonus savers rates might be higher than a cash ISA, which might negate the tax you would pay.

'Bed and breakfasting' is the term for selling and rebuying investments to crystallise a gain to use your CGT allowance (could also be done to create a loss to offset other gains). In order to avoid CGT you need to wait 30 days before you rebuy, buy a different share, or rebuy the same share but inside your ISA. If it doesn't go into your ISA then the value they rebuy at is then used as the tax cost for the purposes of next years calc (repeat next year assuming you've made gains/can stay under the CGT threshold).

If you haven't used your ISA allowance then it makes sense to get them into your ISA. If you have already used your allowance then it could be worth doing before the Labour budget, but I'm not certain it will be helpful - it depends if they decide to amend the current year tax rules (including the portion of the tax year thats already happened) or whether it would only impact future tax years.

EDIT - missed the subsequent posts, late to the game, soz