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Bed & ISA

What is a Bed and Individual Savings Account (ISA)

A Bed and ISA is where an investment is sold and then bought back within an ISA. The two transactions are carried out together so there is less exposure to market movement. However, the amount of shares bought in the ISA may be less than the amount of shares sold in the dealing account due to the costs deducted – stamp duty, dealing charge and the difference between the market buying and selling price. 

Under HM Revenue and Customs regulations, you cannot transfer your existing investment straight into an ISA as stock. Instead, you need to sell your shares and reinvest the sale proceeds into your choice of ISA fund(s).

You should note that your investment will be out of the market between the sale of your existing fund(s) and the purchase of your new fund(s).

HM Revenue and Customs will treat this as a new ISA investment, so it counts as part of your ISA allowance for the relevant tax year.

Where the original investment is held in an Open-Ended Investment Company (OEIC) or Unit Trust (UT) the investments/funds will need to be sold and then repurchased by the ISA manager.

The sale of your existing investment will count as a disposal for Capital Gains Tax (CGT) purposes. When the sale proceeds are reinvested in full, any CGT liability will have to be met from other resources.

Find out more in our Bed & ISA Guide

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