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www.InvestmentGuide.co.uk Other types of
Investment Trusts
Unit Trusts
How best to invest in stocks and shares
INVESTMENT TRUST
(Also called Investment Trust Individual Savings Account)
A means of investing up to £7,200 a year in investment trusts which will then be exempt from any capital gains tax when you sell and also exempt from higher rate income tax.
Who can invest UK residents 18 or over. Joint plans are not allowed but husband and wife can have one each. You can only invest in one Stocks & Shares ISA from one manager in each tax year.
How worthwhile Good value for higher rate taxpayers. For others, the smallish tax concessions are not very worthwhile; it is easier to buy and sell by investing directly in investment trusts shares. You have a choice of using your limit instead in full or part with a fixed interest investment which you gives better income tax relief, see Stock ISA. Or you can instead invest up to £3,600 of the £7,200 limit in cash on deposit.
CAT Standard ISAs ISAs may not be the best value in the case of investment trusts as the rules for investment trusts are rather restrictive. For instance investment trusts must not have gearing of more than 10%, investments must be spread in the same way as unit trusts and OEICs are, investment trust split level shares are not eligible, and stamp duty on purchase must be met out of the annual charge.
Minimum £30 to £50 monthly. Lump sumsUsually £500 or £1,000.
Maximum £7,200 a year since 6 April 2008.
Suitable Regular savings. Lump sums.
Money back 10 days after you sell. Managers don't usually deal every day. You get the market price when you sell. If you die the plan ends and your money is returned.
Interest Variable. Called dividend. The before tax interest is called the yield .
Interest paid Dividends can be accumulated by being invested in more shares; or they can be paid by cheque to you or to a bank account half-yearly, quarterly or yearly.
Tax Income is taxed at 10% on shares; nil on stocks; 20% on money on deposit awaiting investment. Nothing need be entered on a tax return. Capital gains are tax exempt.
Fees to pay Varies - likely to be less than all but CAT standard unit trusts.
Passbook None. Statements sent, monthly, half-yearly or yearly.
Children Not allowed.
Risk High but not as risky as buying individual shares. The value of the share can go down as well as up.
How to invest Choose a trust or manager which operates a scheme. Choose a high yielding ordinary trust with a discount and gearing. Monthly investment is normally by direct debit or standing order from a bank account.
Where from Invest direct instead.
Other types of
Investment Trusts
OEICs and Unit
Trusts
Last updated 14
April 2008.