Further to our annual review meeting of Xth XXXXX 2015, I am now writing to confirm the outcome of our discussion regarding utilising your ISA allowance for 2015/2016 and in future years.
My advice is based on the details you provided at our meeting. It is important that if you disagree with anything I’ve written here, or you have any questions about the information in this letter, that you contact me as soon as possible.
On this basis we discussed using your ISA allowance this year and in future years and the benefits of Bed andISA. Thisis effectively whereyou agree in advance toselling units inyour currentunit trustaccount and then simultaneously buying back the same unitswithinyour ISA on an annual basis. I explained the tax benefits of doing this as well as providing an opportunity to use some of your Capital Gains tax allowance.
I also explained that you may incur a capital gain when you sell the unit trust which is unlikely to be higher than your annual Capital Gains allowance, but may exceed it if other gains in the same tax year, when taken together with this gain, exceeds your annual allowance. In 2015/2016 the annual Capital Gains tax allowance is £11,000 and as long as the gain together with any other gains you may have in the same tax year is less than the allowance, there is no tax to pay.
Any gain in excess of the annual allowance will be taxed at a rate of 18% if, after adding the net taxable gain to your taxable income in the relevant tax year, the total falls within the basic rate income tax band. A tax rate of 28% applies to gains or parts of gains which exceed the upper limit of the basic rate income tax band.
I will consult you at each annual review meeting each year before proceeding with Bed and ISA. The other risk you should be aware of is that you may sell units in a rising market, which may result in you buying units at a higher price in the ISA. You agreed to utilising your ISA allowance in future via this method and accept the risks outlined above.
You confirmed at the annual review meeting that your attitude to risk and your capacity for loss has not changed since I originally provided advice on your existing investments. You also confirmed that your circumstances have not changed since providing my original advice. Please refer to my original advice dated xx/xx/xxxx with regard to your current investments and their suitability.
Should you require further information regarding Bed and ISA or any other matter please do not hesitate to contact me.
Yours sincerely,