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best to buy in or out of ISA during market crash?
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best to buy in or out of ISA during market crash?
Hi, like a lot of people I am sitting on a big paper loss, but I also have a new 20k isa allowance. Shares are good value, and I will be slowly buying. My question is: is it best to buy out of the isa now because paper losses will offset future gains...and reserve the isa allowance for later in the year? Any advice on this strategy? thanks
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- Lemon Half
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Re: best to buy in or out of ISA during market crash?
agomez wrote: My question is: is it best to buy out of the isa now because paper losses will offset future gains...and reserve the isa allowance for later in the year?
There's no longer any rule which says you cannot hold cash in an ISA. So you can transfer the £ 20,000 allowance now and only invest it when you fell more confident.
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- Lemon Half
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Re: best to buy in or out of ISA during market crash?
agomez wrote:Hi, like a lot of people I am sitting on a big paper loss, but I also have a new 20k isa allowance. Shares are good value, and I will be slowly buying. My question is: is it best to buy out of the isa now because paper losses will offset future gains...and reserve the isa allowance for later in the year? Any advice on this strategy? thanks
Where are your potential gains located?
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Re: best to buy in or out of ISA during market crash?
I should have clarified I intend to buy basically the same shares in vs out of the isa but the isa is automatically tax free whereas the non--isa would effectively also be tax free because losses will offset gains.
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- Lemon Quarter
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Re: best to buy in or out of ISA during market crash?
agomez wrote:I should have clarified I intend to buy basically the same shares in vs out of the isa but the isa is automatically tax free whereas the non--isa would effectively also be tax free because losses will offset gains.
Do you have dividends, do any unsheltered dividends approach the tax free allowance of £2000? Income tax on dividends as well as CGT might be another factor.
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- Lemon Slice
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Re: best to buy in or out of ISA during market crash?
agomez wrote:Hi, like a lot of people I am sitting on a big paper loss, but I also have a new 20k isa allowance. Shares are good value, and I will be slowly buying. My question is: is it best to buy out of the isa now because paper losses will offset future gains...and reserve the isa allowance for later in the year? Any advice on this strategy? thanks
This implies you will have, over the coming year, more than the £20k allowance that you want to invest (because you could invest outside the ISA now, and still be able to put your £20k contribution in it later). If you think shares are going to go up, then starting off with investment inside the ISA would mean the largest gains are inside the ISA, and then you invest the rest of the money later in the year outside it, with slightly less gain when you eventually sell them.
However, if you have, or expect you will have, substantial gains outside the ISA in the long term, then it's worth seeing if there's a way you can use your yearly Capital Gains allowance - £12,300 this year. How to use that depends on what your losses, or gains, are outside the ISA right now.
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