Bed & ISA tax advantages as deadline nears

Alice Haine, Personal finance analyst, Bestinvest. Croner-i

With less than four weeks until tax year end, the clock is ticking for taxpayers wanting to make use of Bed & ISA rules, explains Alice Haine, personal finance analyst at Bestinvest.

The process allows savers to sell investments held in a taxable environment and repurchase them within a tax wrapper, helping to protect future income and gains from tax.

‘With the tax year end falling on the Easter weekend, savers must time the transactions carefully to ensure they don’t miss out,’ says Alice Haine, personal finance analyst at Bestinvest.

Bed & ISA, also known as Bed & Pension for pension savers, allows savers to sell investments held in a taxable environment and repurchase them within an Individual Savings Account (ISA).

‘This move effectively shields those assets from future tax on income and gains but care needs to be taken not to breach your annual capital gains tax (CGT) exemption of £3,000 in the process,’ said Haine.

With less than four weeks until the 2025-26 tax year ends at midnight on 5 April, investors that hold assets in a trading account, or have share certificates sitting in a drawer at home, must act fast to make the most of their tax-free allowances, particularly if they want to take advantage of a Bed & ISA transaction. 

Haine added: ‘The limited time window to complete these transactions is even more pressing this year as tax year end falls over the long Easter weekend. Brokers and platforms set early Bed & ISA and Bed & Pension deadlines to ensure sales and transfers are processed in time, but there is an extra bank holiday to navigate around for Good Friday on 3 April. 

‘To complete a Bed & ISA process in full, investors typically need up to 10 days, or even up to four weeks, or longer, for those who first need to migrate share certificates on to a nominee account to sell them.

‘Remember, the urgency not only relates to selling the assets and realising the CGT gain but also to utilising your tax-free allowances before the financial year ends. Once the money is loaded into your ISA or pension, however, you can then take your time to make your investment selection.’ 

The deadline for Bed & ISA is Friday 27 March at 5pm at Bestinvest, which means any investments you wish to move from the Investment Account to your ISA or SIPP must be sold by that date. This is to allow enough time to process the sale and transfer the cash to the Investment Account. 

Benefits of Bed & ISA

While selling investments held outside a tax wrapper and buying new assets can be done relatively quickly, those that want to crystallise a gain and then repurchase the same shares and funds outside of an ISA must adhere to UK rules that require investors to wait 30 days to buy back the same investment. 

However, Bed & ISA or Bed & Pension is an exception to the 30-day rule as the money is being moved into a tax-protected Stocks & Shares ISA or a private pension, such as a self-invested personal pension (SIPP). The transaction can happen quickly for a digital transfer, although for those holding share certificates bear in mind the transaction will take longer. 

Time is of the essence for investors wanting to use Bed & ISA as the annual £20,000 ISA allowance resets on 6 April. Also bear in mind changes coming down the track which will reduce the ISA personal allowance to £12,000 for April 2027.

When considering Bed & ISA, there are also some advantages for married couples and civil partners who can use interspousal transfers to switch assets between each other without triggering a tax charge and making use of both sets of CGT exemptions.

Here Haine provides a step by step guide to Bed & ISA transactions:

Step one: Those with no ISA savings at all should open a Stocks and Shares ISA, while others can use their existing ISA account. 

Remember, if you hold shares in certificate form, they must first be transferred to a General Investment Account with your chosen ISA provider before they can be sold and the gain crystallised. This process can take up to four weeks, or longer, so time is critical for this transaction.

Step two: Check how much of your £20,000 tax-free allowance is left across Stocks & Shares ISA or another type of ISA with a different provider. 

Step three: Sell your existing investments held in an investment account up to the value you want to move into your ISA, ideally taking care not to exceed your current CGT exemption limit of £3,000 in the process. Bear in mind that it can take a little while for the sale of your investments to clear, and the cash becomes available to reinvest. 

While CGT may be payable on any profits above your annual allowance, moving the money into an ISA means this will not be the case in the future.

Step four: Move the money and reinvest, but not straightaway if you want more time. Purchases of UK-listed shares (other than those listed on AIM) will incur stamp duty of 0.5% so factor those costs in.

If you are moving to another provider, wait for the funds to appear in your investment account as cash, then make the transfer to the ISA you hold with them. Again, there is the chance of more price movement between trades in this instance.     

Once the cash is added to the ISA, you can then buy back the same investments – effectively ending the Bed & ISA journey. 

Savers can also hold the money in cash in their Stocks & Shares ISA, although rules on cash holdings are expected to change from April 2027 with tax likely to be charged, but HM Treasury has not finalised the precise rules as yet.

Some platforms provide interest payments on cash balances, so the money might not be sitting idle. At Bestinvest, cash attracts an interest rate of 2.98%, which is set by the platform’s custodian SEI. 

About the author

Alice Haine, personal finance analyst at Bestinvest by Evelyn Partners