Would you withdraw money to place in an ISA when in the higher tax bracket?

[sop]

Hi all,

Given the yearly ISA allowances and that over time they have the potential to generate a lot of revenue through interest, would you take the 32.5% hit to withdraw money to place into an ISA (namely a stocks and shares), if you were in the higher bracket?

I am aware this is a complex question, but I'm wondering what you do in this situation.

Cheers

[northernladuk]

It's a complex question.....

[DaveB]

Work out the ROI on the ISA and figure out if you can leave it there long enough to offset the tax paid on the dividends you withdrew.

Fag packet calculation says £10000 withdrawn would leave you with £6750 after tax and would take around 5 years at 10% to break even.

[sop]

It's a complex question.....

You know I actually included that last line because I tried to preempt the comment that I knew you would make based on your responses having read through these forums. Looks like preempting isn't enough...you just comment it anyway. Out of interest, are you actually currently in employment? Or are you some sort of contract forum commenter?

[sop]

Work out the ROI on the ISA and figure out if you can leave it there long enough to offset the tax paid on the dividends you withdrew.

Fag packet calculation says £10000 withdrawn would leave you with £6750 after tax and would take around 5 years at 10% to break even.

Thanks Dave. Yeah I agree with your point of view and calculations. Just wondering what other contractors have done when in this situation.

Cheers

[LondonManc]

Thanks Dave. Yeah I agree with your point of view and calculations. Just wondering what other contractors have done when in this situation.

Cheers

Speculate - buy 6750 pounds of premium bonds, buy shares, etc?

Sit on it for warchest

Take the hit and do what the hell you want with it.

[Intel]

It's all swings and roundabouts. Depends on your personal situation. If you can take it out and leave it in an ISA for 30 years then that's different to if you'll need it in 3 years but won't have any income from the business at that point.

Or you can gamble that divi tax will be lowered in the future and leave it there assuming you'll pay less tax at that point in the future.

Personal opinion is HM Gov will "fix" the IR35 situation in the future by taxing dividends above a threshold punitively so that the tax is equal to that from income. They're not far off that now anyway and it'll save a ton of tribunal cases.

I'd take the cash, spend it on booze, women, fast cars and then blow the rest.

[MrMarkyMark]

You know I actually included that last line because I tried to preempt the comment that I knew you would make based on your responses having read through these forums. Looks like preempting isn't enough...you just comment it anyway. Out of interest, are you actually currently in employment? Or are you some sort of contract forum commenter?

[northernladuk]

Out of interest, are you actually currently in employment? Or are you some sort of contract forum commenter?

What is this employment thing you talk about?

But it is complex. What you do should be part of an overall tax strategy based on a host of factors we simply do not know and I would guess at this point you also fully don't.

We don't know how much is in the company, how much it will grow over the year, who else is part of the company, if you have pension and other tax options and so on and so on. IMO asking such a simple isolated question just does not make any sense and the answer will just be a guesstimate and ignores all the points above that apply to the respondent. You could be comparing apples with pears.

You are not going to get a very good answer trying to look for a simplistic answer in a very complex area IMO.

[Eirikur]

No.
But I might put it in a pension fund