Credit deflation and the reflation cycle to come (part 8)

[Mandalorian]

Just now, Bobthebuilder said:

What are Flexible Isas and which platforms offer them? - Investors' Chronicle (investorschronicle.co.uk)

 

We're not talking about flexible ISAs though.

SO just run me though your understanding in this scenario.

 

Non-flexible ISA

 

You pay in £16k.  £4k allowance remaining.

You receive £1k of dividends - which you withdraw.

What your remaining allowance?

[Bobthebuilder]

1 minute ago, Democorruptcy said:

When you get a dividend at HL it doesn't drop into your Capital Account, it's listed under cash as income. You can withdraw it or transfer it to your Capital Account. Do you transfer it to your Capital Account then withdraw cash from that?

That is worth lookin at, I will try it.

[leonardratso]

Anyway, its all academic, im just looking for a home for my 75pence from peabody, turns out the local co-op wont do a deposit sale on chewing gum.

[Mandalorian]

3 minutes ago, Democorruptcy said:

When you get a dividend at HL it doesn't drop into your Capital Account, it's listed under cash as income. You can withdraw it or transfer it to your Capital Account. Do you transfer it to your Capital Account then withdraw cash from that?

FFS.  Are HL still doing that?!

[leonardratso]

1 minute ago, Mandalorian said:

We're not talking about flexible ISAs though.

SO just run me though your understanding in this scenario.

 

Non-flexible ISA

 

You pay in £16k.  £4k allowance remaining.

You receive £1k of dividends - which you withdraw.

What your remaining allowance?

4K

[Bobthebuilder]

1 minute ago, Mandalorian said:

We're not talking about flexible ISAs though.

SO just run me though your understanding in this scenario.

 

Non-flexible ISA

 

You pay in £16k.  £4k allowance remaining.

You receive £1k of dividends - which you withdraw.

What your remaining allowance?

I will check next week and try what @Democorruptcy has suggested. 

[Democorruptcy]

Just now, Bobthebuilder said:

That is worth lookin at, I will try it.

What do you do now though? When you receive a dividend and decide to withdraw it to spend it, do you transfer it to your capital account first or not?

 

[Mandalorian]

10 minutes ago, Bobthebuilder said:

I will check next week and try what @Democorruptcy has suggested. 

But on your current understanding, what remaining allowance do you have in that situation?

 

Your problem might be something to do with that nonsense capital and income account shite that HL do. 

It's possible if you do what @Democorruptcysays then HL's systems might treat your transfer of dividend from income account to capital account as a paying in transaction and knock it off the £20k allowance.  Which would be a total crock of shit if that's what they are doing.  I've no idea if they are doing that but it sounds like it from what you have described.

I have none of this problem with iWeb.  There's just 'account'.  No 'capital account' and 'income account' and transferring income to capital.  Income just appears in the account.

If this is what happening with your HL ISA then that's an "HL systems way of doing things" problem and not an "ISA rules" problem.  But I can't see how they'd run it that way.

Edited March 31 by Mandalorian

[leonardratso]

having said that i did start a flexible isa 2024 ready for 2025 and i accidentally paid a couple of hundred into it cos the number of accounts ive got there is confusing, so that blew my limits since id already maxxed out elsewhere, so i might get a ltter from hmrc calling me a cunt, ill reply to it when/iif it comes agreeing with their sysnopsis but hopefully not offering or being forced to pay owt back, albeit about 6 pence in interest.

[Mandalorian]

1 minute ago, leonardratso said:

having said that i did start a flexible isa 2024 ready for 2025 and i accidentally paid a couple of hundred into it cos the number of accounts ive got there is confusing, so that blew my limits since id already maxxed out elsewhere, so i might get a ltter from hmrc calling me a cunt, ill reply to it when/iif it comes agreeing with their sysnopsis but hopefully not offering or being forced to pay owt back, albeit about 6 pence in interest.

From what I hear HMRC normally tell you off with a snotty letter the first time and get the bank/broker to sort it out (who then send you snotty letters too and sometimes charge you a fee).

Second time, HMRC drop on you like a pile of bricks.

[Bobthebuilder]

5 minutes ago, Democorruptcy said:

What do you do now though? When you receive a dividend and decide to withdraw it to spend it, do you transfer it to your capital account first or not?

 

I normally let them build up a bit, so they automatically get transferred on the 10th of every month.

[leonardratso]

Just now, Mandalorian said:

From what I hear HMRC normally tell you off with a snotty letter the first time and get the bank/broker to sort it out (who then send you snotty letters too and sometimes charge you a fee).

Second time, HMRC drop on you like a pile of bricks.

i dont mind snotty letters, ive got an open fire. Ill see what happens, its not a huge amount so hopefully wont be anything too bad.

[SpectrumFX]

HL have started doing a cash ISA, where you have one account with them, but you can switch your money between offers from different banks at different rates.

I've only just noticed it, so I'm not 100% on how it all works, but on the face of it it seems to be an ISA version of their active savings account, which I've been a happy user of, so I've signed up to try it out.

[Democorruptcy]

1 minute ago, Mandalorian said:

But on your current understanding, what remaining allowance do you have in that situation?

 

Your problem might be something to do with that nonsense capital and income account shite that HL do. 

It's possible if you do what @Democorruptcysays then HL's systems might treat your transfer of dividend from income account to capital account as a paying in transaction and knock it off the £20k allowance.  Which would be a total crock of shit if that's what they are doing.

I have none of this problem with iWeb.  There's just 'account'.  No 'capital account' and 'income account' and transferring income to capital.

If this is what happening with your HL ISA then that's an "HL antiquated way of doing things" problem and not an "ISA rules" problem.

Why is your way better? If you withdraw money from your account, won't that be classed as withdrawing cash from an ISA and affect your annual ISA allowance? HL gives people the option not to move money to the capital account, so withdrawing a dividend doesn't affect their annual ISA allowance. I've never made a withdrawal from my capital account or cash account but thought that was the point of splitting the capital/income. If @Bobthebuilder's divis are going into his capital account, his allowance must drop as if he's taken cash out?

[Mandalorian]

10 minutes ago, Democorruptcy said:

Why is your way better? If you withdraw money from your account, won't that be classed as withdrawing cash from an ISA and affect your annual ISA allowance? HL gives people the option not to move money to the capital account, so withdrawing a dividend doesn't affect their annual ISA allowance. I've never made a withdrawal from my capital account or cash account but thought that was the point of splitting the capital/income. If @Bobthebuilder's divis are going into his capital account, his allowance must drop as if he's taken cash out?

Withdrawals should not affect your allowance.

Your allowance is £20k under all circumstances.

Withdrawing £7k doesn't reduce the allowance to £13k. 

You can still pay in a maximum of £20k that tax year.

 

Are you telling me HL have a separate income account held outside your ISA where your ISA dividends accumulate?

 

'My way' as you put it (actually Lloyds' way), doesn't treat dividends as income and then sweep them into the main ISA account on the 10th of the month and then somehow reduce my allowance.  That sounds like a bonkers way of doing it.

The dividends automatically just appear in the ISA on the payment date with no messing about with income and capital accounts or sweeping.

 

I have never had a situation where I have had to move dividends (or had them automatically moved) from some weird income account into some weird capital account inside the ISA and then have my allowance reduced.  That's just bizarre.

 

Quote

If @Bobthebuilder's divis are going into his capital account, his allowance must drop as if he's taken cash out?

Why would they even have that feature?  It runs the risk of people moving stuff around and buggering up their allowance by not undertstanding what's going on.

 

If I transfer out £7k on the first day of the tax year from my iWeb ISA then £7k appears in the bank a day or so later.

My allowance still shows as £20k.  Not £13k.

Why would it be £13k?

Edited March 31 by Mandalorian

[Bobthebuilder]

22 minutes ago, Democorruptcy said:

What do you do now though? When you receive a dividend and decide to withdraw it to spend it, do you transfer it to your capital account first or not?

 

I have had a look and there is an option to auto pay out dividend income to my bank account, but it does not say whether this will affect my allowance, going to have to try I suppose to see what happens.

Also cash interest is not included in the income section, so that would have to come off my allowance.

Edited March 31 by Bobthebuilder

[Mandalorian]

2 minutes ago, Bobthebuilder said:

I have had a look and there is an option to auto pay out dividend income to my bank account, but it does not say whether this will affect my allowance, going to have to try I suppose to see what happens.

Also cash interest is not included in the income section, so that would have to come of my allowance.

How weird.

[leonardratso]

3 minutes ago, Bobthebuilder said:

I have had a look and there is an option to auto pay out dividend income to my bank account, but it does not say whether this will affect my allowance, going to have to try I suppose to see what happens.

Also cash interest is not included in the income section, so that would have to come of my allowance.

yeah i think thats a bit strange, ive got an ancient lloyds s&s isa myself and i have it set to just pay out divis to my bank account when they come in, i dont pay into it anymore (for years) and its allowance was always 20K, it never dropped despite me paying out divis regularly.

[Bobthebuilder]

1 minute ago, Mandalorian said:

How weird.

Agree, some of the rules around this stuff is very confusing, glad we are not talking about pensions.

It makes sense in a way, if you had say £10K to invest in an ISA why would you want to withdraw £10K.

I no longer add to an ISA as I am close to retiring, but I do find the loss of allowance annoying just in case I need to use it, 25% withdrawal from SIPP for example.

 

[Democorruptcy]

Just now, Mandalorian said:

Withdrawals should not affect your allowance.

Your allowance is £20k under all circumstances.

Withdrawing £7k doesn't reduce the allowance to £13k. 

You can still pay in a maximum of £20k that tax year.

 

Are you telling me HL have a separate income account held outside your ISA where your ISA dividends accumulate?

 

'My way' as you put it (actually Lloyds' way), doesn't treat dividends as income and then sweep them into the main ISA account on the 10th of the month and then somehow reduce my allowance.  That sounds like a bonkers way of doing it.

The dividends automatically just appear in the ISA on the payment date with no messing about with income and capital accounts or sweeping.

 

I have never had a situation where I have had to move dividends (or had them automatically moved) from some weird income account into some weird capital account inside the ISA and then have my allowance reduced.  That's just bizarre.

Like I said, I've never withdrawn money from my ISA. I was merely trying to suggest why @Bobthebuilderallowance might be going down when he makes a withdrawal. The only reason I could think was because it might matter if the withdrawal was from his capital account, if that's how it works. He needs to ask HL and tell us the answer.

[Bobthebuilder]

1 minute ago, Democorruptcy said:

He needs to ask HL and tell us the answer.

I will and report back next week.

[ThoughtCriminal]

@sancho panzaHave you looked at Fresnillo lately? It's come down a long way since its 2020 high.

 

 

[Mandalorian]

11 minutes ago, Democorruptcy said:

Like I said, I've never withdrawn money from my ISA. I was merely trying to suggest why @Bobthebuilderallowance might be going down when he makes a withdrawal. The only reason I could think was because it might matter if the withdrawal was from his capital account, if that's how it works. He needs to ask HL and tell us the answer.

I'm wondering if that's what's going on.

If it is then it doesn't sound very tax efficient.  It can't be right.

 

I filled my iWeb ISA with £20k at the start of last tax year.  Spent every penny on shares (plus or minus about £4)

I currently have £3k cash in the ISA of accumulated dividends waiting to be invested.

On the 6th of April I will pay in £20k.  That makes £23k of tax free cash in my ISA ready to be used to buy shares.

 

What happens with HL?  Where does my £3k go?  Can I buy £23k of shares in the ISA or will I have to buy £20k shares inside the ISA and the other £3k in a general taxable account?

£3k in a taxable account.  That cannot be right.

Edited March 31 by Mandalorian

[Mandalorian]

5 minutes ago, Bobthebuilder said:

Agree, some of the rules around this stuff is very confusing, glad we are not talking about pensions.

It makes sense in a way, if you had say £10K to invest in an ISA why would you want to withdraw £10K.

I no longer add to an ISA as I am close to retiring, but I do find the loss of allowance annoying just in case I need to use it, 25% withdrawal from SIPP for example.

 

The beauty of ISAs is how simple they are.  (Until they buggered about with flexible and lifetime ISAs - but the original main ISA is so simple)

 

You can pay in a maximum of £20k allowance in any tax year.  (Currently allowed to pay into 1 cash and 1 shares ISA - but no more than £20k in total across both your ISAs - not £20k each)

All capital gains and dividends in the ISA are tax free.

All withdrawals are tax free.

 

Simple!

 

I honestly can't see how you are losing allowance - unless its some administrative thing that I don't have to suffer with Lloyds.

But I'm struggling to see why any ISA provider would run a system that treats your dividends as a contribution from the allowance.

[Animal Spirits]