Bed and ISA
Already holding investments outside an ISA? This one move can shelter them from future tax — without selling permanently.
A Bed and ISA is the process of selling investments held in a general investment account (outside an ISA) and immediately rebuying them inside a Stocks & Shares ISA. The result: your investments are now inside a tax-free wrapper, sheltered from all future CGT and dividend tax.
"Bed and ISA" is a play on the old "Bed and Breakfast" CGT avoidance strategy that was outlawed in 1998. Today's version is entirely legal — you are just moving your investments into an ISA.
Why would you do it?
If you bought shares or funds years ago and held them outside an ISA, every future dividend is taxable and every sale could trigger CGT. By moving them into an ISA now, all future growth and income becomes permanently tax-free.
The ISA allowance is only available each tax year. Bed and ISA lets you use your current year's allowance to shelter existing investments, not just new money.
How it works — step by step
- 1.Sell the investments in your general investment account (a CGT event occurs here)
- 2.The cash lands in your account
- 3.Buy the same investments inside your Stocks & Shares ISA
- 4.Future growth and income are now tax-free
Many brokers offer a seamless Bed and ISA process where the sale and repurchase happen on the same day, minimising the time you are out of the market. Check whether your provider supports this.
The CGT consideration
Selling your investments is a CGT event. If your holdings have grown significantly, you may owe CGT on the gain at the point of sale. This is where careful planning helps: you can Bed and ISA in stages across multiple tax years, using the £3,000 annual CGT exempt amount each year to minimise the tax triggered.
If your investments are currently sitting at a loss, a Bed and ISA is especially attractive — you crystallise the loss (which can offset future gains) and move into the ISA at a low cost base.
The 30-day rule
HMRC has a "30-day rule": if you sell shares and buy the same shares within 30 days outside an ISA, the sale and repurchase are matched for CGT purposes (neutralising any gain or loss). However, the rule does not apply when rebuying inside an ISA — so a Bed and ISA is always clean, regardless of timing.
Is it worth it?
For anyone with substantial investments outside an ISA — particularly dividend-paying shares or growing funds — a Bed and ISA is almost always worth doing. The longer you have until you need the money, the more tax-free growth you capture. Even if you trigger a small CGT bill now, you avoid potentially much larger bills in the future.
This guide is for informational purposes only and does not constitute financial advice. Tax rules can change. Always check current HMRC guidance or consult a qualified financial adviser before making decisions.