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IG index smart portfolio: tax treatment?
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Felice
Posted: 31 January 2023 14:37:11(UTC)
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In spring 2021, I invested some capital in an IG Smart portfolio, outside of an ISA wrapper.

My income for the tax year 2021/22 is just below the personal allowance limit, and I am safe for CGT reporting as well, so for that year all is straightforward. However, for 2022/23 I will be over allowance levels and liable to tax, possible both for income tax and CGT.

IG provide a detailed breakdown of all the trades that have been made on my account - there are dozens and dozens of them.
They also provide a consolidated tax certificate, in which the only entry is for overseas income. That one figure is the sum of 2 pages of sums received.

I contacted IG and got told that 'they do not provide tax advice'.

There is nothing on the IG website that mentions tax treatment of the portfolio. The whole thrust of their marketing guff is that the smart portfolio makes investing simple. But if I am going to have to work out every single loss or gain on trades, then it will become a nightmare.

Had they not sent a CTC, I would not have thought about reporting anything to HMRC apart from when I sell part of the investment. Thinking about it, it also makes sense that I should be reporting income.

But what about capital gains? My portfolio has changed internally even though I have not added or withdrawn from it.

Any suggestions, before I try and work out quite how to get IG to either change their marketing guff or explain the tax treatment of one of their portfolios.
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M_Bloggs on 27/02/2024(UTC)
Thrugelmir
Posted: 31 January 2023 14:59:06(UTC)
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Just had a look. Seems very clear. Two options are given when applying.

General investment
A standard investment account, where gains and dividends are taxable.

This account type is useful if you’ve already filled your stocks and shares ISA.


ISA
Use your £20,000 ISA allowance so that your investment gains and the dividends you receive are all tax-free.

Your ISA allowance resets at the start of the tax year.

As with investing generally. Onus is on the individual. Hence why Financial Advisors still very much exist. Seeking professional help initially is a good way of gaining a far broader understanding. Cheap services are there for the more experienced and knowledgeable individual.
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Tim D on 31/01/2023(UTC), Newbie on 31/01/2023(UTC)
Felice
Posted: 31 January 2023 15:58:35(UTC)
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Thrugelmir, I half agree with you as to cheapness. IG costs slightly less than Nutmeg, but Nutmeg gives you a tax certificate with both the interest/divis recevied, and the capital gain made. IG only gives you income received and a great long list of transactions.

But the principal behind them both is the same - put your money in and they do all the rest, ie aimed at unsophisticated investors.

Do you know what info Vanguard Lifestrategy accounts give for tax purposes? They are even cheaper.
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Tim D
Posted: 31 January 2023 16:02:07(UTC)
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Felice;255813 wrote:
There is nothing on the IG website that mentions tax treatment of the portfolio. The whole thrust of their marketing guff is that the smart portfolio makes investing simple. But if I am going to have to work out every single loss or gain on trades, then it will become a nightmare.


And how much profit has this made you compared with the dull alternative of sticking it all in a buy-and-hold-forever passive fund (a Vanguard Lifestrategy, say)? How does that profit look if you account for the amount of your time and/or accountant's fees it's going to need to handle the tax side?

(Oh, and I see "smart portfolio" manages an array of ETFs... are you aware of "excess reportable income"? Have IG looked that up for you and included it in the tax certificate? If they haven't, are you?)

I see this story repeated endlessly in countless investing forums. Punters get dollar signs in their eyes over FX, crypto, meme-stocks, CFDs... whatever... and think the way to riches is to trade trade trade (or to have some "robo adviser" do it for them)... with no conception of the amount of complexity they're storing up for themselves when tax time comes around. This has all happened before and it will all happen again.

As Thrug hints above: tax-sheltered ISA and SIPP accounts are the place to indulge these trading fantasies (even if it's having a robot do the trading for you)... outside of them you really want to keep it simple: find something you can stick with, buy it, hold it. If you don't you'll end up needing to learn a lot more about the tax system than you ever will about the assets you're investing in.
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Newbie on 31/01/2023(UTC), Thrugelmir on 31/01/2023(UTC), Keith Cobby on 31/01/2023(UTC), MarkSp on 31/01/2023(UTC), Felice on 31/01/2023(UTC), COYS54 on 01/02/2023(UTC), mgk on 15/03/2024(UTC), Julianw on 15/03/2024(UTC), Guest on 16/03/2024(UTC)
Thrugelmir
Posted: 31 January 2023 16:30:13(UTC)
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Felice;255820 wrote:
Thrugelmir, I half agree with you as to cheapness.


I understand where you are coming from. Unfortunately once you need tailored hands on advice. To navigate you through the complexities that exist. The actual cost is considerably higher. Unless you are prepared to perform the legwork yourself. CGT has been around for many years. Knowing that gains and losses need to calculated / reported to HMRC. Should be in the forefront of the mind when selecting a service provider.

Nutmeg is a relatively new entrant. Small range of options. They'll be targeting a very different client market to IG. Someone I've never considered using myself in the main due to cost and no requirement for many of their services that they offer.
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Tim D on 31/01/2023(UTC)
MarkSp
Posted: 31 January 2023 17:14:40(UTC)
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I guess the issue is that it is a management service and not a product. Probably why they do state it can be used in the IG ISA.

What I have doie with HMRC is give them the net number and, all the transactions. If they want to get their calculators out, they are welcome to disagree :) They never have

I discolse every trade whether I need to pay tax or not - it demonstrates a pattern..
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Felice
Posted: 31 January 2023 17:34:52(UTC)
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I'm not a total newbie to investing, and I know a bit about CGT, or can find out it if need be (I used to be an accountant). Looks like I had better start looking at the transactions carefully and sorting out the calculations sooner rather than later for this tax year and not leave it to the last minute!!!

The irony is that I wanted something simple to invest in that was not a passive Vanguard account.

Lesson (painfully) learnt.
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Tim D on 02/02/2023(UTC), Julianw on 15/03/2024(UTC)
Thrugelmir
Posted: 31 January 2023 17:39:12(UTC)
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Felice;255842 wrote:
I'm not a total newbie to investing, and I know a bit about CGT, or can find out it if need be (I used to be an accountant). Looks like I had better start looking at the transactions carefully and sorting out the calculations sooner rather than later for this tax year and not leave it to the last minute!!!



Did you have anything to report for 21/22 tax year?

Easiest way to address the issue is to export the data using CSV file format into a spreadsheet. Then work your way through the transactions. Shouldn't then take that long.
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Felice
Posted: 31 January 2023 18:29:21(UTC)
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In the period up to 5/4/22, my IG portfolio increased by just over £3,000. Since I have other gains of only £5,000 for the year, I think that I can safely assume that I am below the level of the CGT allowance. I'll do the calculations anyway but I'm fairly confident I do not need to report anything to HMRC. Same with income as I am well below the personal allowance. Phew.

I will probably ditch the IG portfolio and head for a passive investment like Vanguard.
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Tim D on 02/02/2023(UTC)
M_Bloggs
Posted: 27 February 2024 12:29:34(UTC)
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Joined: 22/12/2023(UTC)
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For my IG account I use the following tax calculator tool. You load your trading history excluding the headers, select 'IG' and it will convert the format of the IG file to a standard formula used for the calculator. From there you copy and paste the output into the calculator and it will return your dividends and CGT applicable.

There are many other tools available that are similar, so this may not be the best one out there.


http://www.cgtcalculator.com/Convert.aspx

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