More about Bed and ISA

While the name ‘Bed and ISA’ might seem like an obscure expression, the idea is simple – you sell investments that you’re holding outside an ISA and then buy the same investments back within your ISA.

The value of investments can fall as well as rise and you could get back less than you invest. If you’re not sure about investing, seek independent advice. Tax rules can change and their effect on you will depend on your individual circumstances.

What is Bed and ISA?

Using an Individual Savings Account (ISA) is one of the most tax-efficient ways to invest. Essentially it’s a savings wrapper that shelters your returns and gains from the HM Revenue & Customs. But what about the assets you hold outside an ISA? If you’d like to pay less tax on these returns, you should consider moving them into an ISA.

Always bear in mind that tax rules can change in the future. Their value to you depends on your individual circumstances which, over time, can change as well.

About your ISA allowance

Every UK resident gets an ISA allowance, which dictates how much you can put into your ISA each tax year. In 2024-25, it’s £20,000. You can put your entire annual allowance into a cash, an investment, or an innovative finance ISA. Or, alternatively, you can split your allowance between these three types of ISA and the lifetime ISA. However, with a lifetime ISA you can only pay in up to £4,000 in each tax year, and they are only available for individuals under the age of 40.

Dividends received in ISAs are also exempt from tax. If investments are held outside an ISA, the Dividend Allowance means that individuals receive their first £500 in dividends tax-free, but any dividends above this amount will be charged at 8.75% for basic rate taxpayers, 33.75% for higher rate taxpayers and 39.35% for additional rate taxpayers. Income from cash, funds, gilts or bonds held outside an ISA is only tax-free if it is not more than the £1,000 Personal Savings Allowance (PSA) if you’re a basic rate taxpayer, or the £500 PSA if you’re a higher rate taxpayer. Additional rate taxpayers do not have a PSA.

Learn more about how the dividend allowance works 

Find out about the personal savings allowance 

However, you can normally only subscribe to an investment ISA with cash, so you’ll need to sell your investments to use these to fund your ISA subscription, and this is part of the Bed and ISA process. However, you can transfer shares held through a recognised Save As You Earn scheme (SAYE) to an ISA.

Why Bed and ISA with Smart Investor?

We make your Bed and ISA transaction simple.

We take care of the sale and repurchase of your investments – otherwise, you’d have to instruct the sale, transfer the cash and then buy back the investment. All we need is one quick online instruction from you and we’ll do the rest.

Once your transfer is complete, you can enjoy all the benefits of tax-efficient investing with us.

  • No tax to pay on any gains or income your investments earn from the point they’re added to the ISA
  • Fair and transparent fees
  • A seamless investing experience with our user-friendly platform
  • The ability to view your investment accounts alongside your bank accounts
  • A wide range of investment opportunities and tools to help you make the right investing decisions.

How does it work?

To begin with, you’ll need to hold your investments in a Barclays Investment Account (not an ISA) and then open a Barclays Smart Investor Investment ISA to move the proceeds into.

You can only buy back the same investments that you plan to sell – tell us the name and value of the investments that you want to ‘move’ into your Investment ISA. We’ll then sell your investments on the open market – that’s the ‘bed’ part of the transaction, move the proceeds into your Investment ISA, and then buy your investments back within your ISA.

The amount you move into your ISA can’t exceed the annual allowance of £20,000, less any contributions you’ve already made in the current tax year. If the proceeds on the sale of your investments exceed what you’re allowed to put into your ISA, we’ll only put into the ISA what’s left of your allowance and leave the remainder in your Investment Account. We’ll send you a notification via your chosen alert channel when the transactions are complete and your contract notes – confirmations of your buy and sell transactions – are ready for you to view.

How much will it cost to Bed and ISA?

There are no transaction fees on either the buy or sell side of your Bed and ISA transaction, but depending on your personal circumstances you may incur capital gains tax (CGT) on the sale of your investment and Stamp Duty and potentially, depending on the value of your transaction, the levy imposed by the Panel for Takeovers and Mergers will be charged on your purchase.

As the process is a sale and repurchase, you should be aware that there may be a difference in price between the two as a result of two factors:

  • Many investments have a lower price for you to sell than the price for you to buy the investment
  • Even though the sale and repurchase will happen in quick succession, there may be movements in the market between the two occurring.

As a result, you’re likely to have slightly fewer shares or units in your ISA than you held originally.

Find out more about our Investment ISA fees

What do I need to know?

  • Make sure you’re happy with our range of investments, our fees and other terms
  • Bed and ISA is only available between 08:00 and 16:15 (15:30 on the last day of the tax year and 12:15 if the market closes at 12.30). Any instructions submitted after this time will be processed the following day. This is particularly important to keep in mind when near the tax year end deadline of 5 April – remember to get your instructions to us in plenty of time. 
  • You can only contribute up to a value of £20,000, which is the annual ISA allowance for the 2024-25 tax year
  • Every time you contribute into your Investment ISA, the amount is deducted from your annual allowance. This leaves you with less of your annual allowance for new investments
  • The first £3,000 of gains on assets you hold outside a wrapper, such as an ISA, are exempt from CGT but any gains above this level are taxed. Bearing in mind the limit on how much you can contribute into an ISA, it’s unlikely that a gain on the sale of an investment before you move the proceeds into your ISA will be taxable, but you may need to consider it in the context of gains you might make on the sales of other assets in the same tax year
  • You’re out of the market while we process the Bed and ISA transaction. If the value of your investment rises during this period, you’ll miss out on the gains and get less for your money when you buy your investment back. Of course, the opposite could happen too
  • The spread on the buy/sell will impact the number of shares we will buy back in your Investment ISA. This is particularly important when you instruct a Bed & ISA for small cap stocks or where shares are illiquid 
  • Market investments such as shares and ETF are traded in real time and normally the sale and repurchase in the ISA happen close together and within the same day. If for some reason there’s a delay, or in the case of funds, which transact only once a day, you won’t hold the investment overnight (or a weekend if the sale is placed on a Friday). This means you could miss out on entitlements determined at the close of business on that day, such as dividends or interest payments, any corporate actions such as rights issues and on voting rights. It’s possible that any shareholders’ benefits, for example, discounts on services, may not be received on the same terms when you repurchase the shares
  • There are no transaction fees on a Bed and ISA transaction, but there may be CGT charged on the sale of the investments and Stamp Duty and the Panel of Takeovers and Mergers levy will apply to purchases, where applicable
  • Tax rules might change in the future and their value to you will depend on your individual circumstances, which might also change.

I want to Bed and ISA with Barclays Smart Investor

To place a Bed and ISA order, just click on the ‘Bed and ISA’ button. You’ll find it by selecting ‘Overview’ once you’ve logged into your account. You can then choose which investments you want to sell from your Investment Account and buy them again within your Investment ISA.

Don’t have an account with us yet? As well as having an open Investment Account, you’ll need to open an Investment ISA before you can carry out your Bed and ISA.

The value of investments can fall as well as rise and you could get back less than you invest. If you’re not sure about investing, seek independent advice. Tax rules can change and their effect on you will depend on your individual circumstances.

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