Bed and ISA is a process where you sell investments held in a taxable account (General Investment Account), use your CGT annual allowance to cover any gain, then immediately rebuy the same investments within an ISA. This shelters all future gains, dividends, and interest from tax. The name comes from 'Bed and Breakfasting' — an older tax strategy.

Is Bed and ISA worth the hassle?

It's usually worth it if you have significant gains building outside an ISA and haven't used your ISA allowance. The one-time effort shelters all future returns from tax forever. For a higher-rate taxpayer with £50,000 outside an ISA growing at 7%, sheltering it could save over £20,000 in tax over 20 years.

Does Bed and ISA trigger capital gains tax?

Selling the investments to do a Bed and ISA does create a taxable disposal. However, you can use your £3,000 annual CGT allowance to cover gains tax-free. If gains exceed £3,000, you'll pay CGT on the excess — but future gains within the ISA will be completely tax-free, usually making it worthwhile.

Can I do Bed and ISA with the same broker?

Yes, most brokers that offer both general accounts and ISAs allow Bed and ISA. Some even offer automated Bed and ISA services that handle the sale and repurchase seamlessly. Check with your broker — they may call it 'Bed and ISA', 'ISA transfer', or similar.

Bed and ISA Explained — How to Move Investments Tax-Free | PocketWise

Bed and ISA is a smart strategy to move existing investments into a tax-free wrapper. Here’s exactly how it works and when to use it.

What Is Bed and ISA?

The Process

Step	Action
1	Sell investments in taxable account
2	Use CGT allowance to offset gains
3	Deposit cash into ISA
4	Rebuy same (or similar) investments
5	Future growth is now tax-free

Why It’s Called “Bed and ISA”

Term	Origin
Bed and Breakfast	Old strategy: sell to use allowance, rebuy next day
Bed and ISA	Modern version: rebuy within ISA
30-day rule	Killed old bed and breakfast for same account
ISA exception	Rebuy in ISA is fine immediately

Why Bed and ISA Matters in 2026/27

The case for Bed and ISA has grown significantly since the annual CGT exempt amount was slashed:

Tax Year	CGT Exempt Amount
2022/23	£12,300
2023/24	£6,000
2024/25 onwards	£3,000

With only £3,000 of gains tax-free each year, investors with growing portfolios face real CGT exposure. Moving holdings into an ISA permanently eliminates future tax on those assets — not merely defers it.

How the Tax Works

Before Bed and ISA

Element	Tax Status
Your investment gains	Subject to CGT (18-24%)
Your dividends	Subject to dividend tax (8.75-39.35%)
Interest (bonds)	Subject to income tax (20-45%)

After Bed and ISA

Element	Tax Status
Future investment gains	Tax-free
Future dividends	Tax-free
Future interest	Tax-free

What You Pay on Exit

Gain Size	Tax Due
Up to £3,000	£0 (covered by allowance)
£5,000 (basic rate)	£360 (18% on £2,000)
£10,000 (higher rate)	£1,680 (24% on £7,000)

Step-by-Step Process

Step 1: Check Your Position

Question	Why It Matters
What’s your gain?	Determines tax on sale
Have you used CGT allowance?	£3,000 free
Have ISA allowance left?	Need room to rebuy
Any losses available?	Can offset against gain

Step 2: Calculate the Gain

Calculation	Example
Current value	£30,000
Purchase cost	£20,000
Gain	£10,000

Step 3: Sell Investments

Action	Notes
Sell in taxable account	Creates disposal for CGT
Same-day sale	Price locked
Settlement	Usually T+2

Step 4: Move Cash to ISA

Timing	Consideration
Same day	Minimizes time out of market
Settlement	Must wait for cash to settle
ISA subscription	Uses current year’s allowance

Step 5: Rebuy Investments

Option	Effect
Same fund/shares	Exact same exposure
Similar fund	Slight variation is fine
Complete	Investment now in ISA

Costs to Consider

Transaction Costs

Cost Type	Typical Amount
Selling fee	£0-12 per trade
Buying fee	£0-12 per trade
Spread (buy vs sell price)	0.1-0.5%
Stamp duty (UK shares rebuy)	0.5%

Example: Full Cost Analysis

Element	Amount
Portfolio value	£20,000
Gain	£5,000
CGT (18% on £2,000)	£360
Sell trade fee	£10
Buy trade fee	£10
Spread (0.2%)	£40
Stamp duty (0.5%)	£100
Total one-off cost	£520

Is It Worth It?

Future Value	Tax Saved Over 20 Years
£20,000 at 7% (grows to £77,000)	~£12,000 CGT saved
One-off cost	£520
Net benefit	£11,480

When Bed and ISA Makes Sense

Good Candidates

Situation	Why Bed and ISA Works
Large gains outside ISA	Shelter future growth
Haven’t used ISA allowance	Room to rebuy
Long time horizon	More years of tax-free growth
Higher/additional rate taxpayer	Highest tax savings
Gains under £3,000	Tax-free exit

Poor Candidates

Situation	Why It May Not Work
Very large gains this year	May pay significant CGT
No ISA allowance left	Can’t rebuy in ISA
Planning to sell soon anyway	Less future tax to save
Basic rate + PSA covers dividends	Less tax saving
Investments with entry fees	Costs eat benefits

Bed and ISA Services

Broker Offerings

Service Type	How It Works
Automated	Broker handles sale and rebuy
Self-service	You sell and rebuy manually
Hybrid	Broker assists but you approve

What to Ask Your Broker

Question	Why It Matters
Do you offer Bed and ISA?	Not all brokers do
Cost per trade?	Impacts whether worth it
Same-day execution?	Minimizes market risk
Which investments eligible?	Some funds restrict

Timing Considerations

Best Time of Year

Timing	Consideration
April	Fresh CGT allowance
Before April 5	Use this year’s ISA allowance
Market dip	Lower gain = less CGT

Market Risk During Transfer

Risk	Mitigation
Price moves while cash	Same-day rebuy
Market falls after sale	Rebuy cheaper (bonus)
Market rises after sale	Miss some gain

Minimizing Time Out of Market

Approach	Out-of-Market Time
Same-day rebuy	Hours
Next-day rebuy	1-2 days
Wait for settlement	2-3 days

Special Situations

Bed and ISA With Losses

Situation	Strategy
Some holdings have gains	Bed and ISA those
Some holdings have losses	Consider keeping outside
Why?	Losses can offset other gains

Multiple Tax Years

Strategy	How It Works
£3,000 per year	Move gains equal to allowance
5 years to move £15k gains	£0 CGT
Requires patience	But tax-efficient

Couples Strategy

Approach	Benefit
Transfer to spouse first	Use their allowance too
Both do Bed and ISA	£6,000 combined CGT-free
Different ISAs	Each has £20,000 allowance

Bed and ISA vs Alternatives

Bed and ISA vs Bed and SIPP

Factor	Bed and ISA	Bed and SIPP
Access	Anytime	From 55 (rising to 57)
Tax relief on entry	None	20-45%
Tax on exit	None	75% taxed as income
Best for	Flexibility	Retirement saving

Bed and ISA vs Just Holding

Approach	Outcome
Hold outside ISA	Pay CGT on eventual sale
Bed and ISA now	Pay small CGT now, none later
Hold until death	CGT-free uplift (but IHT risk)

Decision Framework

If	Then
Need flexibility	Bed and ISA
Long to retirement	Consider SIPP too
Elderly	May hold for death uplift
Need access soon	Don’t lock in SIPP

Record Keeping

What to Document

Record	Purpose
Original purchase price	For CGT calculation
Sale price and date	Disposal record
ISA purchase price	New base cost
Transaction costs	Deductible for CGT

Reporting Requirements

Situation	Action
Gain under £3,000	May not need to report
Gain over £3,000	Self Assessment
Multiple disposals	Add together for year

Common Questions

Can I Bed and ISA a Fund With Exit Fees?

Consideration	Answer
Exit fees	Must factor into cost analysis
Sometimes	Better to wait until fee expires
Calculate	If tax saved > fees, proceed

What If I Can’t Rebuy the Exact Fund?

Scenario	Solution
Fund not available in ISA	Choose similar fund
Same index, different provider	Very similar exposure
Slight difference	Usually acceptable

Does My Cost Base Reset?

In ISA	Effect
New purchase price	Market value at rebuy
Future gains	From this new base
But in ISA	Gains are tax-free anyway

Bed and ISA Checklist

Before Starting

Check	Done?
Calculate unrealized gains
Check ISA allowance remaining
Review CGT allowance used
Compare costs vs tax saved
Check broker requirements

Execution

Step	Done?
Sell investments
Cash settles
Subscribe to ISA
Rebuy investments
Keep records

After

Step	Done?
Confirm ISA holding correct
Record gain for CGT purposes
File Self Assessment if needed

ISAs UK: Cash, Stocks & Shares, Lifetime, Junior and Transfer Rules

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