Robbie Burns
Robbie Burns's columns :
10/08/2005All about IPOs
27/07/2005What's the best way to go Short?
13/07/2005Trend Timing - Let the Trend be your Friend
08/07/2005Terrorism and the Stock Markets
28/06/2005London Stock Exchange SETS mm
13/06/2005Holiday from the Markets
06/06/2005Dividends
23/05/2005Penny Shares
09/05/2005A Cautionary Tale about Stock Gossip
25/04/2005Making Money from the Markets
11/04/2005Buy Winning Companies not Losing Ones
29/03/2005ISA Shares >>
13/03/2005Trading Patience
28/02/2005The Bear Necessities
16/02/2005Stock Market Psychology Seminars
01/02/2005Share Imagination
19/01/20057 Deadly Stock Sins
10/01/2005Happy New Year
21/12/2004Stock Picks 2005
13/12/2004Suspended Shares
29/11/2004Share Teasers
12/11/2004spread-betting-secrets
03/11/2004Nervous Nineties Stocks

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Robbie Burns – The Naked Trader

Robbie has been trading full-time since 2001. His book "The Naked Trader" (which also has useful information on how to use advfn) has become one of the biggest-selling finance books, reaching the top 150 books on Amazon - order it here. Trades made for Robbie's website have amassed profits of more than £300,000. You can read about his buys and sells daily at www.nakedtrader.co.uk.


ISA Shares

29/03/2005

Time is running out.... and I hate to nag, but if you haven't fully invested in self-select ISA shares this financial year, do it NOW! You have until April 5th. You can put in £7,000 (and another £7,000 the day after in the new tax year).

"What's the point?!" I hear you cry. "There are no advantages anymore..."

You're right in a way. Thanks to recent government action, most of the tax benefits of ISAs have been wiped out, but the big benefit is that there is no capital gains tax to be paid. Remember, you can only make around £8,000 a year in profits. After that, any profits you make on share deals get taxed at your tax rate.

You might well say: "What's the point? You can only put a small amount in, so surely capital gains tax will never be a problem."

WRONG!

So far, I've saved nearly £30,000 in taxes, which I would've had to pay if I had never put all my share money into ISAs, or Peps as they used to be called.

As the years go on and you build your portfolios, the ISA tax advantage becomes more and more apparent. Let's say you build up £150,000 of capital inside your ISAs over the years - perfectly possible. I know of two people who have more than £1,000,000 inside their ISAs. Now, say you have a very good year and turn that £150,000 into £250,000. That's a profit of £100,000. Outside an ISA that profit - if you were a 40% taxpayer - would cost you a huge £36,800 in capital gains tax.

Another example: say you put in £7,000 - and you struck lucky - you bought a penny share that trebled. Sell and you now have £21,000 - that's a profit of £14,000. Inside the ISA - no tax. Outside, your profit will be taxed at £2,400 - assuming you are a higher-rate taxpayer.

So use your allowance! And you can double it easily, if you're married. Get your husband/wife to open one too… then you'll have £14,000 a year to play with, tax free.

Nearly all brokers will manage a self-select ISA in conjunction with shares bought outside. It's worth checking to see if they make any standing charges to look after your ISA. Most do, so expect to pay a little - an average is probably £15 a quarter.

There is no maximum amount you can build in your ISA.

Withdrawal from ISAs can be made anytime, but once cash is taken it cannot be replaced, except with your annual allowance. Once you sell shares within your ISA, you can immediately invest the cash in a new share. You can put anything you like in your ISA, except for AIM or Ofex listed shares.

So, don't be lazy - use your ISA allowance every year! I promise you, if you make good profits on shares, you'll be thanking me for nagging you in a few years time!


You can read Robbie’s daily market comments together with his latest buys and sells at his website www.nakedtrader.co.uk

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