Answers · UK 2025/26

What is a Bed and ISA and how much tax can it save in 2026/27?

Bed and ISA means selling shares held outside an ISA and immediately rebuying them inside one, using your GBP 20,000 ISA allowance. Future gains and dividends become tax-free. You may trigger Capital Gains Tax on the sale, but the GBP 3,000 annual exempt amount can cover small gains.

Last updated: 10 June 2026Last reviewed: 10 June 2026How we verify

Full answer

A Bed and ISA moves existing investments from a taxable general account into a stocks and shares ISA in one linked transaction: you sell the holding, then rebuy it inside your ISA, using part of the GBP 20,000 annual ISA allowance. From then on, all growth and dividends are sheltered from Capital Gains Tax and dividend tax. The catch is that selling outside the ISA is a disposal for Capital Gains Tax. In 2026/27 the annual exempt amount is GBP 3,000; gains above this are taxed at 18% (basic band) or 24% (higher band). You cannot simply transfer shares in directly because ISA subscriptions must be in cash, hence the sell-and-rebuy. Worked example: Raj holds GBP 18,000 of shares in a taxable account with a GBP 2,500 unrealised gain. He does a Bed and ISA: he sells, realising the GBP 2,500 gain, which is fully covered by his GBP 3,000 annual exempt amount, so he pays GBP 0 CGT. He rebuys the same shares inside his ISA, using GBP 18,000 of his GBP 20,000 allowance. Next year, if those shares pay GBP 600 in dividends, it is entirely tax-free, versus being taxed at 10.75% or more outside the ISA. Doing this each tax year lets you gradually shelter a portfolio while keeping realised gains within the GBP 3,000 exemption. Watch dealing costs and the brief out-of-market gap. Use the bed-and-isa calculator to size the gain against your exemption, and the capital-gains-tax calculator to check any tax due. For the rules on ISA subscriptions and CGT, see gov.uk.