Bed and ISA Explained — Sheltering Existing Investments From Tax in 2026/27
How the Bed and ISA process works, using your £20,000 ISA allowance and £3,000 CGT exemption to move investments into a tax-free wrapper for 2026/27.
Why Investors Use Bed and ISA
Investments built up outside an ISA — in a general investment account, for example — are subject to Capital Gains Tax on growth when sold, and Income Tax or dividend tax on any income they generate along the way. Bed and ISA is a process that moves an existing holding into the tax-free ISA wrapper: you sell the investment in the general account, then buy back the same (or a similar) investment inside your ISA, using your annual ISA subscription allowance. From that point on, further growth and income within the ISA is entirely tax-free, which is the whole point of doing it.
The CGT Question at the Point of Sale
| Situation at the point of sale | CGT outcome |
|---|---|
| Gain (plus any other gains that year) within the £3,000 exemption | No CGT due |
| Gain exceeds the £3,000 exemption | CGT due on the excess at the applicable residential/other assets rate |
| Holding shows a loss | No CGT due; the loss may be usable against other gains |
Because the £3,000 exemption is an annual allowance, a large holding with substantial unrealised gains may not be moveable into an ISA in a single tax year without triggering a CGT bill — spreading the Bed and ISA process across two or more tax years, using a fresh £3,000 exemption (and, where relevant, a fresh £20,000 ISA allowance) each year, is a common way to manage this without paying more CGT than necessary.
Using the ISA Allowance Alongside the CGT Exemption
The repurchase side of a Bed and ISA transaction uses your ISA subscription allowance in the normal way — moving £15,000 of investments into an ISA through this process uses £15,000 of that tax year's £20,000 ISA allowance, leaving £5,000 available for further contributions if you have other money to add. Because both the £3,000 CGT exemption and the £20,000 ISA allowance reset each tax year (with no carry-forward), planning a Bed and ISA transaction around the start of a new tax year, or spreading a large transfer deliberately across the April boundary, can make efficient use of two years' worth of both allowances.
Watching Out for the Practical Details
Selling and repurchasing isn't entirely free of cost in practice — dealing charges apply to both the sale and the repurchase, and there can be a short period out of the market between the two transactions (even if brief) during which prices could move. Some platforms offer a bundled Bed and ISA service that handles both legs together, which can reduce the time out of the market and simplify the paperwork compared to doing the sale and repurchase manually as two separate transactions.
Planning Your Own Bed and ISA Transaction
- Calculate the unrealised gain on the holding you're considering moving
- Check whether the gain fits within your £3,000 annual CGT exemption, or whether spreading across tax years would help
- Confirm you have enough remaining ISA allowance for the repurchase
- Check whether your platform offers a bundled Bed and ISA service to reduce dealing costs and time out of the market
Use the Bed and ISA and Capital Gains Tax calculators below to estimate the CGT due and plan the transfer around your annual allowances.
Frequently asked questions
What does Bed and ISA actually involve?
Bed and ISA means selling investments held outside an ISA (in a general investment account, for example) and immediately repurchasing the same or similar investments inside an ISA, using your annual ISA subscription allowance. This moves the holding into a tax-free wrapper going forward, though the sale itself may trigger a Capital Gains Tax calculation on any existing gain.
Will I pay Capital Gains Tax when I sell investments as part of a Bed and ISA transaction?
Possibly — the sale is a normal disposal for CGT purposes, so any gain is measured against your £3,000 annual CGT exemption in the usual way. If the gain (combined with any other gains that tax year) stays within the exemption, no CGT is due; if it exceeds the exemption, CGT is payable on the excess at the applicable rate for the asset type.
Is there a way to avoid a same-day repurchase creating a CGT problem?
The CGT calculation is based on the sale itself, not the repurchase, so timing a Bed and ISA transaction to make use of your £3,000 annual exemption (perhaps spreading a larger holding's transfer across more than one tax year) is the main lever available to manage the CGT impact, rather than any special exemption for the Bed and ISA process itself.
Does Bed and ISA use up my £20,000 annual ISA allowance?
Yes — the repurchase inside the ISA counts as a normal ISA subscription, using up part or all of your £20,000 annual allowance depending on the value being moved, exactly as if you were making a fresh cash contribution.
Try the calculators
Bed & ISA Calculator UK 2026/27 — CGT Cost and Long-Term Benefit
Calculate the CGT cost of selling investments outside an ISA and the long-term tax-free benefit of rebuying inside a Stocks & Shares ISA.
Capital Gains Tax Calculator
Calculate Capital Gains Tax on property, shares and other assets for 2025/26.
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