Bed and ISA Explained: Moving Investments Into Your ISA Tax-Efficiently

If you’ve built up investments outside an ISA - in a General Investment Account, an old employee share plan, or an inherited portfolio - and you have unused ISA allowance this year, ‘Bed and ISA’ is one of the simplest ways to bring them into a tax-free wrapper. Here’s exactly how it works, and why it’s become more popular in recent years.

What Bed and ISA actually is

Bed and ISA is a two-step transaction: you sell an investment held outside an ISA (typically in a General Investment Account), and immediately use the proceeds to buy the same investment back inside a Stocks & Shares ISA. Most platforms will do both legs as a single instruction, often on the same day, so you’re not left sitting in cash while the trades settle.

The name comes from the older, now-blocked practice of ‘Bed and Breakfasting’ - selling investments at the end of a tax year purely to use up a tax allowance, then buying them straight back the next day. That practice was stopped by a 30-day rule in 1998, which normally prevents you from selling and rebuying the same investment within 30 days without HMRC treating it as if you never sold. Bed and ISA is a specific, HMRC-recognised exception to this rule, because the repurchase happens inside a different legal wrapper (an ISA) rather than the same taxable account.

Why people do it

Once an investment sits inside a Stocks & Shares ISA, all future growth, dividends, and interest it generates are permanently free of Capital Gains Tax and Income Tax. If the same investment stays in a General Investment Account, every future dividend and every eventual sale is potentially taxable.

The catch: selling can trigger Capital Gains Tax now

Moving an investment via Bed and ISA counts as a genuine disposal for tax purposes, so if the investment has grown in value since you bought it, you may owe Capital Gains Tax (CGT) on the gain.

• The annual CGT exemption for 2026/27 is £3,000 - down from £12,300 as recently as 2022/23.
• Gains above the exemption on shares and funds are taxed at 18% for basic-rate taxpayers and 24% for higher and additional-rate taxpayers, following the rate increase announced in the October 2024 Budget.
• If your unrealised gain on a holding is close to or under £3,000, moving it via Bed and ISA this tax year may cost you little or nothing in CGT.
• If gains are much larger, many investors spread the process across several tax years - moving one holding (or one CGT-allowance’s worth) at a time - rather than triggering a large tax bill in one go.

What it costs beyond any tax

• A dealing charge (often just one combined charge if your platform processes both legs together).
• Stamp Duty Reserve Tax at 0.5% on the ISA repurchase of most UK-listed shares (this doesn’t apply to gilts or many Irish-domiciled ETFs).
• The ‘spread’ between buying and selling prices, which can mean a small, unavoidable cost even before any dealing charge.

Timing matters

Your ISA allowance resets on 6 April each year, and platforms often set an earlier internal cut-off - sometimes as early as mid-afternoon on 4 or 5 April - to guarantee the trade settles in time to count for the current tax year. If you’re doing this near the tax year deadline, start the process well in advance; transfers and settlement can take several days.

Bed and SIPP and Bed and Spouse: the same principle, different wrapper

The same 30-day exemption applies if you repurchase inside a SIPP (‘Bed and SIPP’) rather than an ISA, or if a spouse or civil partner buys the investment in their own name (‘Bed and Spouse’) using their own CGT allowance and ISA headroom. Which makes sense depends on whether you’d rather have the money locked away in a pension, sheltered in an ISA, or split between both partners’ allowances.

When it isn’t worth doing

• You’ve already used your full £20,000 ISA allowance for the tax year.
• The unrealised gain is very small - dealing costs may outweigh the benefit.
• The CGT triggered would push a large amount of income into a higher tax band in one go, when spreading the move across two or three tax years would cost less overall.

The bottom line

With the Capital Gains Tax allowance and dividend allowance both cut sharply in recent years, and dividend tax rates rising again from April 2026, holding investments outside an ISA is more expensive than it used to be. If you have spare ISA allowance and investments sitting outside a wrapper, Bed and ISA is often worth doing gradually, using your CGT allowance each tax year rather than all at once.