Dividend tax and stocks-and-shares (n)ISA

[d000hg]

As I understand it, dividends on ISA-held shares are already taxed at source, and this will transition to the dividend tax with £5000 allowance in 2016 - is that right and does it mean shares held in an ISA are treated exactly the same as far as dividend taxation goes, as those held outside?

If so a couple of questions...

1)If you have dividend-attracting shares inside and outside ISAs, can you choose where the allowance is applied?

2)How does this affect a typical contractor-Ltd, where I hold shares in an investment portfolio, AND receive dividends from my own company? How do I make sure my investment dividends get properly accounted for in terms of dividend allowance/taxation?

If these are bad questions I've presumably misunderstood it at a more basic level, feel free to correct me.

[jamesbrown]

ISAs are completely tax free. This includes any dividends received. Nothing is going to change w/r to ISAs.

[ContrataxLtd]

As I understand it, dividends on ISA-held shares are already taxed at source, and this will transition to the dividend tax with £5000 allowance in 2016 - is that right and does it mean shares held in an ISA are treated exactly the same as far as dividend taxation goes, as those held outside?

If so a couple of questions...

1)If you have dividend-attracting shares inside and outside ISAs, can you choose where the allowance is applied?

2)How does this affect a typical contractor-Ltd, where I hold shares in an investment portfolio, AND receive dividends from my own company? How do I make sure my investment dividends get properly accounted for in terms of dividend allowance/taxation?

If these are bad questions I've presumably misunderstood it at a more basic level, feel free to correct me.

Hi d000hg

I think you've misunderstood the changes somewhat as there is no change to how dividends received in an ISA (or Pension) are taxed, they will still be tax free and not taken into account in your tax computations. The full £5,000 allowance will be available for your dividends received on shares held outside your ISA.

Further reading - https://www.gov.uk/government/public...ance-factsheet

and from that page:

Dividends received by pension funds that are currently exempt from tax, and dividends received on shares held in an Individual Savings Account (ISA), will continue to be tax free.

Hope this helps.

Martin
Contratax Ltd

[northernladuk]

Hi d000hg

I think you've misunderstood

Well that's a new one :

[d000hg]

Thanks. I'd actually thought they were divi-tax-exempt but this article appeared to suggest otherwise:

New Isa rules: how Nisas work - Savings & investments - Which? Money

Q. Do I pay tax on dividends paid within a stocks and shares Isa?
The 10% deducted at source from dividends means that stocks and shares Isas aren't completely tax-free - yet.

However, this deduction will be scrapped from 6 April 2016. Instead, investors will receive a £5,000 tax-free allowance. Beyond this, dividend tax rates will be set at 7.5% for basic rate taxpayers, 32.5% for higher rate taxpayers, and 38.1% for additional rate taxpayers.

I think my second question still stands - if I hold shares outside an ISA through a stock-broker, and receive dividends through MyCo, what's the correct method of making sure these link up?

[Gigglepits]

Hi d000hg

I think you've misunderstood the changes somewhat as there is no change to how dividends received in an ISA (or Pension) are taxed, they will still be tax free and not taken into account in your tax computations. The full £5,000 allowance will be available for your dividends received on shares held outside your ISA.

This makes me think. Is there a way I can hold my own Ltd company shares in an ISA? Even if the only shares I held were for my company it would save lots of tax.

[teapot418]

Thanks. I'd actually thought they were divi-tax-exempt but this article appeared to suggest otherwise:



I think my second question still stands - if I hold shares outside an ISA through a stock-broker, and receive dividends through MyCo, what's the correct method of making sure these link up?

Your SATR.

[ContrataxLtd]

Thanks. I'd actually thought they were divi-tax-exempt but this article appeared to suggest otherwise:



I think my second question still stands - if I hold shares outside an ISA through a stock-broker, and receive dividends through MyCo, what's the correct method of making sure these link up?

Looking at that article I think it is actually incorrect in terms of the taxation of dividends.

Where you have dividends outside an ISA i.e. a combination of dividends on shares held via an investment account/stock broker and dividends from yourCo you simply declare all these on your self assessment as normal. The first £5,000 in total is taxed at 0%, then 7.5%, 32.5% etc. You don't specifically need to use the allowance against a particular dividend as it goes against your total dividend income for the year.

Martin
Contratax Ltd

[ContrataxLtd]

This makes me think. Is there a way I can hold my own Ltd company shares in an ISA? Even if the only shares I held were for my company it would save lots of tax.

If I remember correctly shares have to be listed on a recognised stock exchange to be held in an ISA so unless you plan to float yourCo then you probably can't hold the shares in an ISA.

Martin
Contratax Ltd

[d000hg]

Your SATR.

So you simply ask your stockbroker for some key figures and put them on your SATR after collating with YourCo dividends (or pass them to your acountant)?

This makes me think. Is there a way I can hold my own Ltd company shares in an ISA? Even if the only shares I held were for my company it would save lots of tax.

If I remember correctly shares have to be listed on a recognised stock exchange to be held in an ISA so unless you plan to float yourCo then you probably can't hold the shares in an ISA.

For now at least, but they're opening things up in 2016 to allow P2P lending and maybe it will widen further. It would be amusing if they accidentally opened it up so much we could do exactly as Gigglepits suggests.