Bed & ISA
If you hold shares, including AIM stocks, in an investment account why not consider selling them and reinvesting the proceeds in an ISA? This process is known as Bed & ISA.
Here's how you could benefit
Using the Bed & ISA process lets you:
- Take full advantage of your annual ISA allowance
- Use existing shares investments
- Pay only one dealing fee to cover both the sale and re-purchase
- Buy back the same shares in your ISA straight away, without paying a commission cost to repurchase them (although you will still be liable for stamp duty)
Unfortunately, due to current ISA regulations, you cannot transfer existing holdings directly into your ISA. Which is why you need to sell them in one transaction, and then buy them back in another, via a tax-efficient ISA.
Interactive Investor can help you with the process, and you will usually be able to sell and buy back the same value of shares straight away. As always, all trades are made on a best-execution basis.
Automated Bed & ISA process
The good news is that if you want to buy back the same shares in your ISA straight away, you can use our automated Bed & ISA process.
- This process will sell shares in your trading account and use the consideration generated to buy back shares in your ISA account
- Investors should note that the number of shares you buy back will be slightly smaller due to commission, any bid/offer spread, and any relevant stamp duty or PTM levy
- You must have the relevant ISA allowance available in your account to allow the full reinvestment of shares in your ISA
Log-in to your account, click on Account Admin and select Bed & ISA to open up the order ticket.
Get the best deal for you
If the cost to buy back shares in your ISA is more than £50 above the consideration you will receive from the sale of your holding (excluding stamp duty and commission costs), you have the option of calling our dealers on 0345 200 3637. They will be happy to place your trade manually to try to achieve a lower spread for you.
You should be aware, however, that selling your investments outside of an ISA will realise any capital gains or losses on your existing holdings.
Current rules allow you to make gains of up to £11,100 for the 2016/17 tax year, without having to pay capital gains tax.* A fact worth noting for your financial planning is that if you are realising a loss, you can carry this forward, indefinitely, to offset against future gains.
However, this rule only applies to unwrapped holdings and losses made within ISA accounts and can't be offset against other profits for capital gains tax purposes. This process will not be suitable for all, so if you are in any doubt then please contact your financial adviser.
Once your holdings are within an ISA they are free from future capital gains or income tax and, best of all, any income you make is not declarable on your tax returns.
Where do I start?
Existing customers can add an ISA in less than 5 minutes.
Just log in, select 'Account Admin' and then 'Add Account'. Because our ISA account has no admin or any other fees, you can continue to trade as normal for no extra fees and with the added advantage of doing it tax-efficiently. Normal dealing charges apply.
New customers are welcome too.
Sign up for a trading account with us first, and add an ISA when you register.
Transfer funds to your ISA now
If you have cash in your account, you can simply transfer funds from your trading account to your ISA by selecting the 'Transfer Funds' option.
If you hold shares in your account you can carry out a 'Bed & ISA' transaction by following the simple steps below:
1. Log in to your account and click on the 'Account Admin' tab
2. Under the Miscellaneous section, click on the Bed & ISA link
3. Select the stock, and how much of it you want to transfer from your trading account to your ISA account
4. Once you're happy with the quote you receive for your investments, confirm the transaction
5. All trades are made on a best-execution basis
If you have any queries about the process, please ring us on 0345 200 3637.
Also, as the process involves selling shares and then rebuying them, you will incur trading costs on the sale. You will also pay stamp duty on the repurchase (no costs are incurred for transferring cash holdings).
The above does not constitute advice. If you are in any doubt about the suitability of this process or have any other queries, please contact your independent financial adviser.
Can I Bed & ISA AIM stocks?
The government removed the restrictions that previously meant AIM stocks could not be held within ISAs. All AIM stocks are now eligible for Interactive Investor ISA accounts.
To move existing AIM stocks into your ISA, you can use the automated Bed & ISA process described above.
The price and value of investments and their income fluctuates: you may get back less than the amount you invested. Past performance is no guarantee of future performance. The tax treatment of ISAs depends on your individual circumstances and may be subject to change in the future. If in any doubt, please consult a financial adviser.