Stocks & Shares ISA Query

8th Feb '21 by Groiders

8 comments 454 reads

Hi All

I realise this may not be the most appropriate place to raise for my query but thought there might be others within the community that have already sussed this one out.

I've got a Stocks and Shares ISA account with one particular stock broker, and within that account, I've set the option to automatically re-invest dividends back into the shares I have in that account.

I know that UK tax rules only allow you to pay into one S&S ISA per year. (and with current limit of £20k per year). Also, I believe HMRC deems the first S&S ISA you start paying into in the new tax year as the S&S ISA you will be using for that tax year and need to stick with that for the remainder of the year, or otherwise migrate the holdings to a different S&S ISA, so that ultimately you always only have one S&S ISA you are actively paying into in any one tax year.

When the new tax year starts in April, my intention is to switch to trading with a different stock broker and doing so via a new S&S ISA account I can open with them. Also, instead of moving the shares I hold in my existing S&S ISA account over to the new one, I intend to leave them where they are and simply stop paying any additional funds into that S&S ISA account so to comply with HMRC.

The only concern I have is regards keeping the automatic dividend re-investment option enabled on my current S&S ISA account into the new tax year. Specifically, whether any dividend re-investments that result from this, in addition to me funding my new S&S ISA account, would be seen as paying into two S&S ISA accounts in the same tax year (which I know isn't allowed).

I don't think this will be the case from the understanding that these automatic dividend re-investments (although they are effectively first a cash payment into the account that subsequently get re-invested back into the shares, subject to covering the cost of the shares) are not external funds going into the account, and given I won't be funding that S&S ISA account in the new tax year.

Hoping someone can confirm whether I'm right or wrong on this please.

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Dragon

8th Feb '21

Dividends don't get counted as part of your £20k allowance.

Rusty2

Not an expert on this but I think it is fine to re-invest dividends in an old ISA, the dividend is within the ISA already., My dividends are not auto reinvested, but just go into the cash and then I can buy shares with that cash. As long as it's within the ISA you are fine, as soon as the cash leaves the ISA, unless you are transferring it into another ISA, you lose the ISA tax allowances. I have 2 S&S ISAs running now. I can trade in both. Transferring between them seems a lot more difficult and is something that should be improved.

Yes you can only have 1 ISA per tax year but you can have many different ISAs. You can also transfer cash ISAs into your S&S share ISAs.

Groiders

Thanks very much Herbie. Just on that second note - so I could theoretically top up to 20k into one S&S ISA account one year, and 20k into another S&S account the next year, and in that second year can also be simultaneously trading within both two accounts using the funds that are already present there?

Yes you can keep on trading in old ISAs. Some people have ISA going back many years, mine only go back about 10 years.

This is what I have done this tax year, I opened a new ISA with a different platform but I'm still trading in my old ISAs.

That’s a lot more flexible than I thought. Thanks for letting me know.

smegster

If your younger than 40, it might also be worth considering opening both a S&S ISA and a lifetime ISA in the same year (and invest £20k across both accounts).

Each year I try to invest £16k in my S&S ISA and £4k in my lifetime ISA (for which I receive a extra £1k government bonus- which is effectively free money!!!).

ricardomontalban

17th Feb '21

Thanks for this - I have had huge difficulties and ultimately given up trying to transfer Fidelity S&S ISA to IG. It is frustrating that it is so hard. Just going to leave things in Fidelity and start a new S&S ISA with IG in April - reassuring you can run 2 at once as long as no new cash goes into the older ISA. Still messy though although I guess advantages in having 2 (i.e can still invest in ITs with Fidelity).

I'm having issues transferring cash from my HL ISA over to IG, the form only lets you transfer the whole ISA over which I don't want to do. I may have to transfer some cash into a cash ISA and then transfer again into my IG Share ISA. At the moment I have cash flow problems with IG but this should be sorted in April. Yes this should be much easier to do, I agree.

You can add more money to your Fidelity ISA but not in the same tax year.

Some shares and no funds are available with IG, so makes sense to have more than 1 platform.

Stocks & Shares ISA Query

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Groiders

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