If like me you have been selling shares in your ISA during the market crash, you may now have a lot of cash sitting idle in your ISA. Most brokers pay no interest to you on it but prefer to collect it themselves. But now we are into the new tax year, there is a solution to this. Take the cash out and put it on deposit into a high interest current account. You will get over 1% interest.
You can put the cash back into your ISA without losing the tax reliefs so long as you do it within the same tax year (i.e. before April 2021). It is worth checking with your broker or platform provider that their systems support this though – mine certainly does.
If you expect the market to rebound quickly, you may not consider it worth bothering to do this, but the economic news and company results are surely going to be depressing for the next few months. Or as an article in the Financial Times said today: “The UK economy is heading for a recession that is forecast to be deeper than the 2009 financial crisis and one of the most severe since 1900; the coronavirus pandemic has seen consumer demand collapse and many businesses forced to close or significantly reduce operations”. Government moves to stimulate the economy may help but it still uncertain when business will get back to normal so holding cash in an interest paying account makes a lot of sense until the picture is clearer.
There was another interesting point raised in an article in the FT today under the headline “Wealthy seek inheritance tax rebates”. There may have been a number of deaths of elderly and wealthy relatives when stock markets were much higher. Inheritance Tax applies to the value of assets at the date of death, but it can take many months to obtain probate and for an executor to realise the assets. Shares may now be at a lower value so the tax is excessive. But for listed shares you can claim a rebate from HMRC. There is a similar provision for property.
Readers who are exposed to this problem should read the FT article and take professional advice on the subject.
Roger Lawson (Twitter: https://twitter.com/RogerWLawson )