Planning & protection
Bed and ISA is selling investments that you’re holding outside an ISA, and then buying the same investments back within your ISA. In effect, your investment goes to bed as a taxable fund and wakes up the next morning in a tax-efficient ISA wrapper.
Selling non-ISA units and immediately reinvesting in an ISA from the same provider can maintain your chosen risk / volatility level and asset allocation, but it also places the fund in a tax-favoured wrapper. In particular, it shields the fund from any future CGT liability.
It’s important to note that you can’t ‘crystallise’ a CGT liability by selling an investment and immediately buying it back except as an ISA. Otherwise, you must wait at least 30 days between selling and buying back. So, this device isn’t possible if you’ve used all or most of your annual ISA allowance.
As with most investments, there are potential risks involved. The sale of units could incur a CGT charge if the gain on the sale of units exceeds the CGT allowance – but you needn’t Bed and ISA all your units in the same year.
Another potential risk to consider is that overnight stock market fluctuation may adversely affect your investment. However, in practice, providers try to process Bed and ISA instructions quickly and seamlessly, which minimises the risk.
You should consider your Bed and ISA options if you:
If you’re looking to find out more about Bed and ISA or overall investment options, a Fairstone adviser could help.
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INFORMATION IS BASED ON OUR CURRENT UNDERSTANDING OF TAXATION LEGISLATION AND REGULATIONS. FAIRSTONE IS NOT A TAX ADVISER AND INDIVIDUALS SHOULD SEEK INDEPENDENT TAX ADVICE FROM A PROFESSIONAL TAX SPECIALIST. ANY LEVELS AND BASES OF, AND RELIEFS FROM, TAXATION ARE SUBJECT TO CHANGE.
THE VALUE OF INVESTMENTS AND INCOME FROM THEM MAY GO DOWN. YOU MAY NOT GET BACK THE ORIGINAL AMOUNT INVESTED. PAST PERFORMANCE IS NOT A RELIABLE INDICATOR OF FUTURE PERFORMANCE.