Tax Allowance Optimisation is a strategy that can help you minimize any taxes you may owe on capital gains. It involves selling your winning investments every year to make sure you always use your capital gains allowance to its full potential (if you don’t use it in any one year, you lose it!)
This effectively increases your cost basis, meaning you’ll pay less capital gains tax when you decide to sell your assets.
It means you can save on your final tax bill, up to £2,460 for every year you do it! (20% tax on £12,300 allowance)
To take advantage of Tax Allowance Optimisation, you should first hold securities (think stocks or ETFs) outside of an ISA (e.g. in a General Investment Account).
If you’ve made gains on your portfolio, you can sell the winning securities and either:
1) re-purchase them after 31 days, or
2) purchase alternatives with the money
The first option means you risk losing out on a month worth of stock market gains, and the second option can be difficult to do manually if you want to keep your portfolio balanced.
We automatically manage the whole Tax Allowance Optimisation process for you.
We only hold stocks, meaning that we can collect gains on the underlying parts of an ETF. For example, if you hold the FTSE 100 as an ETF and it goes down, you can’t collect any gains to increase your cost basis. But we can do it on some of the individual stocks as we hold each one individually, and some will have gone up.
We also calculate when to cut the winning stocks to minimise your tax burden and find highly correlated alternatives to immediately replace them with.
Our 0.85% management fee is low and all-inclusive, meaning you’ll never be hit with unexpected costs.
You can compare that to over 1.00% at Nutmeg or 0.95% at Moneyfarm where you pay more and get less.