Bed and ISA Sell Stocks and Transfer to ISA

Published / Last Updated on 21/11/2014

Bed and ISA video explains the tax benefits of using up your yearly capital gains tax allowance and transferring directly owned stock investments overnight into an ISA wrapper.


"Hello again. The subject for this video is Bed and ISA: 'bed 'n isa'. What does that mean?

Right, first things first, lots of investors, lots of clients have an investment portfolio that may be held with a stockbroker or it may be with an online platform where you've got shares or you've got unit trusts or investment trusts and things like that.

Now, shares and share based unit trusts and investment trusts, they are subject to capital gains tax. So, you have a yearly capital gains tax allowance but subsequently if you make a gain and you dispose, you sell your shares or your unit trusts etc. then potentially you're liable to capital gains tax. Now, a very common and very simplistic thing to do is your ISA can hold shares, your ISA can have inside it, so that ISA wraps around unit trusts and investment trusts and then they become tax-free they [become] very tax efficient. It's the right way to hold unit trusts and investment trusts inside your ISA.

So 'Bed and ISA':

You sell your shares or use sell your unit trust or investment trusts. That may be sold on the platform that you're using. They are so sold, they are disposed of, you ideally keep within your capital gains tax allowance and then usually, the very next day but some platforms, some stockbrokers may take longer. Your shares or your unit trusts or investment trusts, they are 'bought back' inside your ISA. And then they become extremely tax efficient and you haven't got to worry about capital gains taxes, dealing with the dividends off your shares or your unit trusts or investment trusts when doing your tax returns because the're inside your ISA.

So if you haven't used your ISA allowance and you directly hold shares or you directly hold investment, trust unit trusts literally consider a 'Bed and ISA'.

'Bed and ISA' - literally you sell, you go to bed, next day it's inside your ISA and that's where the term 'Bed and ISA' comes from. So sell your shares, you've then got the cash which is put inside your ISA, your ISA then buys them back. And if you look on your ISA platforms and your investment trading account platforms you'll probably see an option to convert using a 'Bed and ISA' route. Any questions, as ever, come back to us. Thanks very much for watching."

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