How does a Bed and ISA strategy work in the UK?

Full answer

**Bed and ISA** is a tax-planning strategy used to gradually move investments from a taxable general investment account (GIA) into the shelter of an ISA, where all future growth and income is tax-free. **How it works:** 1. **Sell** shares or funds held in your GIA — this is a disposal for CGT purposes 2. **Crystallise** a capital gain up to your annual CGT allowance (£3,000 in 2026/27) — paying no CGT if the gain is within the allowance 3. **Reinvest** the proceeds inside your Stocks & Shares ISA (within the £20,000 annual allowance) 4. **Future growth and income** on those investments is now tax-free forever **The 30-day rule does NOT apply:** The "bed-and-breakfast" 30-day matching rule (which prevents manufacturing losses by selling and rebuying the same shares) applies when the same person buys back outside an ISA. Since the repurchase is *inside* the ISA (different tax wrapper), the 30-day rule is **not triggered** — there is no tax issue with rebuying the same fund immediately. **Annual rhythm:** With a £3,000 CGT allowance each year, Bed and ISA works best as an **annual discipline** — shelter a portion of gains each April. Gains above the allowance incur CGT at 18% (basic rate) or 24% (higher rate). **Partial Bed and ISA:** You don't need to shelter the entire holding at once — sell just enough to use the CGT allowance without exceeding it. **Bed and Spouse alternative:** You can also sell assets and have your spouse/civil partner purchase them — a different taxpayer means the 30-day rule doesn't apply, and you transfer the base cost to a partner in a lower tax bracket. **Charges:** Brokerage platforms typically charge dealing fees on both the sale and repurchase. Factor these into your cost-benefit calculation — for small gains, fees may outweigh the tax saving.

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