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

[Democorruptcy]

3 minutes ago, Mandalorian said:

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 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.

If someone pays in £20k in at the start of the tax year the @Bobthebuilderscenario wouldn't matter because their remaining allowance would be zero immediately after the £20k deposit. They could do what they want with the £3k/£23k.  It only matters to bob because he hasn't been paying anything in.

[Bobthebuilder]

2 minutes ago, Mandalorian said:

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.

I have been maxing out my ISA allowance since they first started, I did withdraw a big chunk in 2012 to buy a house, but have maxed out again since with no withdrawals. Only started taking some of those dreaded divis during the last tax year. I don't lose any allowance from the divis being paid only when I withdraw to my bank account. I will check next week.

I seem to remember @DurhamBorn has been taking divis from an ISA recently to pay for his dodgy massages, how does this work for him? Do you lose your allowance DB?

[Mandalorian]

3 minutes ago, Democorruptcy said:

If someone pays in £20k in at the start of the tax year the @Bobthebuilderscenario wouldn't matter because their remaining allowance would be zero immediately after the £20k deposit. They could do what they want with the £3k/£23k.  It only matters to bob because he hasn't been paying anything in.

True.

But where IS that £3k.  Is it inside the tax shelter or outside?

This really matters.

 

Being able to buy £23k shares tax free vs £20k tax free and £3k taxable is going to be a massive tax disadvantage further down the line.

 

[Mandalorian]

5 minutes ago, Bobthebuilder said:

I have been maxing out my ISA allowance since they first started, I did withdraw a big chunk in 2012 to buy a house, but have maxed out again since with no withdrawals. Only started taking some of those dreaded divis during the last tax year. I don't lose any allowance from the divis being paid only when I withdraw to my bank account. I will check next week.

I seem to remember @DurhamBorn has been taking divis from an ISA recently to pay for his dodgy massages, how does this work for him? Do you lose your allowance DB?

Told you I didn't like dividends.

[Democorruptcy]

1 minute ago, Mandalorian said:

True.

But where IS that £3k.  Is it inside the tax shelter or outside?

This really matters.

 

Being able to buy £23k shares tax free vs £20k tax free and £3k taxable is going to be a massive tax disadvantage further down the line.

 

The £3k is still within the ISA so in a tax free wrapper. It's just held in the cash account section of the ISA until you transfer it to the capital account or they apparently do it automatically on the 10th of each month.

[leonardratso]

2 minutes ago, Democorruptcy said:

The £3k is still within the ISA so in a tax free wrapper. It's just held in the cash account section of the ISA until you transfer it to the capital account or they apparently do it automatically on the 10th of each month.

still doesnt explain why his allowance is going down, if hes not paying into the isa then surely the allowance is just a static 20K/year weather he withdraws the divis or not.

[Democorruptcy]

6 minutes ago, leonardratso said:

still doesnt explain why his allowance is going down, if hes not paying into the isa then surely the allowance is just a static 20K/year weather he withdraws the divis or not.

They shift the cash into his capital account on the 10th of each month, so because he is withdrawing directly from his capital account, they reduces his ISA allowance by the same amount.

[Bobthebuilder]

27 minutes ago, leonardratso said:

still doesnt explain why his allowance is going down, if hes not paying into the isa then surely the allowance is just a static 20K/year weather he withdraws the divis or not.

I provided a link that explains this.

For the allowance to remain at £20K it needs to be a "flexible" ISA, they were introduced in 2016, but it is up to the provider to offer them it is not mandatory. Currently H&L is not a flexible ISA, so the allowance goes down.

Maybe it is different from the income account, I will be trying this and reporting back.

Edited March 31 by Bobthebuilder

[leonardratso]

15 minutes ago, Bobthebuilder said:

I provided a link that explains this.

For the allowance to remain at £20K it needs to be a "flexible" ISA, they were introduced in 2016, but it is up to the provider to offer them it is not mandatory. Currently H%L is not a flexible ISA, so the allowance goes down.

Maybe it is different from the income account, I will be trying this and reporting back.

All sounds a bit shit to me. My lloyds is not a flexible isa either, im not sure how non-flexible cash isas work to be honest i havent had one for years, but ive never seen a flexible s&s isa to be honest either, i dont think they exist do they?
Anyhoo, i doubt id hang around in an isa that reduced my allowance by withdrawals - where ever they went to, capital account, income account, external bank account, that would be really bad on say a year you smashed it out of the park and got huge divis or you had a shit ton in the isa earning divis, logically you could wipe out your allowance for a year by just withdrawing your own money.

[Cattle Prod]

All you need to know about stock tips, analysts and main stream financial news: 

It’s only up 400% since it was kicked out of the DJIA and we bought it. How do these people sleep at night? We may not be perfect here, but we’re a damn sight better than that, ugh.

Not posting as a back slap but as a warning to ignore the noise and find the signal. 

[Long time lurking]

 

[Mandalorian]

29 minutes ago, Democorruptcy said:

They shift the cash into his capital account on the 10th of each month, so because he is withdrawing directly from his capital account, they reduces his ISA allowance by the same amount.

Which doesn't happen in my iWeb ISA (or any other ISA I've ever used)

29 minutes ago, Bobthebuilder said:

I provided a link that explains this.

For the allowance to remain at £20K it needs to be a "flexible" ISA, they were introduced in 2016, but it is up to the provider to offer them it is not mandatory. Currently H&L is not a flexible ISA, so the allowance goes down.

Maybe it is different from the income account, I will be trying this and reporting back.

Mine isn't a flexible ISA and this doesn't happen to me

[Calcutta]

1 hour ago, Jesus Wept said:

Looking at the long term chart there is a lot of risk here for me….. too much downside and volatility from here.

It has troughed at circa $5-10 , four or five times in the last 25 years.

If there is a black swan event or bitcoin / Nasdaq / tech / US Dow crash / war etc etc… it could take a lot of things with it. 

I am going to stick to my “buy low sell high” strategy. It’s worked for me so far except I always sell to bloody low ….

I do love a long term chart like that.

Alright there's a chance we're balls deep into a super cycle and that green line heads off to 100, when it does come down it doesn't go much below fifty again. Fair enough, that's a risk, could double my money in a couple of years.

But if it stays true to form and hits ten again that's an almost nailed on five bag. 

[Funn3r]

21 hours ago, goldbug9999 said:

Your not going to live forever so whats the point of managing your pension pot like you are.

Adrenochrome 

[Red Debt Redemption]

4 hours ago, Harley said:

Is this from a film worth watching?

Breaking bad TV series. Worth it yea.

[Funn3r]

I opened a cash ISA with HL but not put money into it yet. At the same time I noticed that whenever I wanted to login to HL they now wanted to send me a GSM text containing a code number to use in the login process.

This was awkward as there's no mobile signal where I live on any network. When I queried it they told me that as I now had a cash ISA the financial regulations now required them to impose 2factor authentication on me.

I asked them to close the ISA, which they did, and the text requirement went away.

[Axeman123]

8 minutes ago, Funn3r said:

I opened a cash ISA with HL but not put money into it yet. At the same time I noticed that whenever I wanted to login to HL they now wanted to send me a GSM text containing a code number to use in the login process.

This was awkward as there's no mobile signal where I live on any network. When I queried it they told me that as I now had a cash ISA the financial regulations now required them to impose 2factor authentication on me.

I asked them to close the ISA, which they did, and the text requirement went away.

AJ Bell give you the choice between multiple means of MFA each time, including SMS/email (and IIRC a third form that I can't remember). If you are in and out repeatedly over a few days (eg checking on a Bed&Isa transfer) they remember your device and don't ask after the first time.

[Cosmic]

2 minutes ago, Axeman123 said:

AJ Bell give you the choice between multiple means of MFA each time, including SMS/email (and IIRC a third form that I can't remember). If you are in and out repeatedly over a few days (eg checking on a Bed&Isa transfer) they remember your device and don't ask after the first time.

The 3rd would be an authentication app, considerably more secure than the other two, especially given most people's security practices. 

[M S E Refugee]

Just been on the Silver Forum and people were talking about investing in copper.

Apart from stealing copper cable you can collect up copper from your loose change.

Pre 1992 1 and 2p's are 97% copper.

I worked out that £1 in copper is worth £2.37 and a pre-decimal £1=240 pennies would have £15.52 of copper in it.

When it goes Mad Max keep your Silver and Gold and use pre 1992 pennies and two pences.

[Funn3r]

32 minutes ago, Axeman123 said:

AJ Bell give you the choice between multiple means of MFA each time, including SMS/email (and IIRC a third form that I can't remember). If you are in and out repeatedly over a few days (eg checking on a Bed&Isa transfer) they remember your device and don't ask after the first time.

HL only do SMS and the bloke admitted they had not thought it through for customers in poor signal areas. I had to explain to him that if I wanted to login to HL I had to walk to the bottom of the garden and hold the phone up in the air and I sometimes got 1 bar enough for text arrival.

[Pip321]

3 hours 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 off my allowance.

I worked in developing financial products for 10 years including ISAs and looks like @Mandalorianis right (not about the usefulness of dividends obviously….just the ISA bit 😂😂) 😉joking matey. 

The last few pages would have been fascinating customer feedback for a product team. 

Basically you can pay in £20k gross into an ISA. (ie gross I mean the total amount of the deposits you can make once). 

Dividends or withdrawals don’t impact that. Otherwise people with ISA with £100k couldn’t take that out without impacting their allowances for the current year.

The flexible ISA is a nice add (mainly useful for cash ISAs, because many people want access to their cash) where someone can take the money they paid in the current tax year back out….but then replace it back into the ISA again in the same current tax year. So effectively they can pay £20k net in during the year ie deposit minus withdrawals.

However non of this impacts the gross £20k to start with….so it sounds like the way HL are withdrawing things are cocking things up.

Will be interesting to see how that pans out.

[Pip321]

34 minutes ago, M S E Refugee said:

Just been on the Silver Forum and people were talking about investing in copper.

Apart from stealing copper cable you can collect up copper from your loose change.

Pre 1992 1 and 2p's are 97% copper.

I worked out that £1 in copper is worth £2.37 and a pre-decimal £1=240 pennies would have £15.52 of copper in it.

When it goes Mad Max keep your Silver and Gold and use pre 1992 pennies and two pences.

Interesting I have a few old one penny coins and I bet they are easy to collect them by the jar full….or maybe not that easy if people latch onto this.

These (I assume) must be worth more than many think then….if only as a store of copper? 

Ps…this is an internet picture so if this coin is one of the rare ones worth £100k, don’t get too excited 😂😂

[M S E Refugee]

7 minutes ago, Pip321 said:

Interesting I have a few old one penny coins and I bet they are easy to collect them by the jar full….or maybe not that easy if people latch onto this.

These (I assume) must be worth more than many think then….if only as a store of copper? 

Ps…this is an internet picture so if this coin is one of the rare ones worth £100k, don’t get too excited 😂😂

It has around 6.5p of Copper in it.

[Bobthebuilder]

14 minutes ago, Pip321 said:

Dividends or withdrawals don’t impact that.

Individual Savings Accounts (ISAs): Withdrawing your money - GOV.UK (www.gov.uk)

 

[M S E Refugee]

https://www.inflationtool.com/british-pound/1970-to-present-value?amount=1&year2=2024&frequency=yearly

This is interesting, I had worked out an old £1=240 pennies would have copper worth £15.52 in them.

Now according to this inflation calculator a £1 in 1970 would be worth £15.60.