Hi!

Can someone explain what the benefit of having a share ISA is? I know how a cash ISA works but as we are entitled to around £8k tax free capital gains allowance I didn't know what the benefit is supposed to be in the case of shares.

you pay tax on bank accounts and investments. If an investment goes up the government takes cut. An ISA is a wrapper, that protects your money from the tax man. You are allowed add to your investment each year, previous years continue to be protected from the tax man.

All investments (apart from your primary home, and a bank account) are liable to capital gains tax above a threashold (8.2k?), an ISA would protect you from gains above the threashold if the investment was wrapped in an ISA. Its all a little complicated so dont worry...
http://www.fool.co.uk/taxes/articles/cgt_shares.htm

My tip, wrap as much as you can in ISAs... then the threasholds are higher, only deal with it if you have to....

so it's only worthwhile, if your shares soar or once you've been adding to your share ISA's over several years as this is only way you could make profit of over 8k, when can only put a £4k in a share ISA? (Already got a cash ISA)

if you have money in a share ISA you dont need to worry about CGT ever, your protected, it can go up as much as you like. The CGT allowance of 8.2k applies to investments outside of your ISAs...

You can open/add £3000 in a cash ISA and £4000 in a stocks a shares ISA each tax year... ie 7k tax protected investment each year. If you need to investment more than 4k pa in stocks and shares, you can but if the sum of your investments (excluding your primary property) rises by more than 8.2k in a year your liable for capital gains on the remainder (I think, its a little complicated)... Basically dont worry unless your loaded... Interestinlgy second property, BTL, cars, anything, Art?, is also liable for CTG.

Oh added disclaimer check everything yourself, im not giving you any financial advice its just idle chat

isa's are just a way of soaking up excess liquidity which helps supress the effects of general inflation in the economy ie your not spending it

they also give the individual the impression they are 'saving' - in reality inflation is reducing it's spending power yoy (roughly 5% in a 6% cash isa)

i've got an isa - but only for the liquidity and to partially preserve some of it's spending power while it sits there

i've no illusions about it's value being whittled away yoy


long term saving? - buy gold...

Apart from being free of CGT, there is also an advantage as far as dividends are concerned.

Outside an ISA, the tax on dividends is 10% for starting rate and basic rate taxpayers, and 32.5% for higher rate taxpayers.
Inside an ISA, there is no change for starting or basic rate taxpayers, but higher rate taxpayers are taxed at 10%.