BED and ISA ??? advice please

flopsy1973

hi
i have around 46,000k worth of shares from a save as you earn scheme which are held on certificate outside of a isa. I have a account with hargreaves lansdown and am considering doing the bed and isa with them. i am a basic rate taxpayer and will eventually want to sell these shares to fund a new house purchase. Do i do this to use my isa allowance and thus sheltering it from CGT ??? as the shares were bought originally for around 9k i have made a gain so is this the best course of action to avoid paying tax ??? any thoughts or ideas would be welcome

Keep_pedalling

If you have not used any of you CG allowance this financial year now would be a good time to sell a portion of these shares to cash in some of that gain. If you act quickly you should be able to sell just under a 1/3 of them now and a similar amount after April 5th, which will unlock much of that gain without having to worry about CGT. You can then use the proceeds to diversify your current one company investment.

Vortigern

https://www.gov.uk/tax-employee-share-schemes/transferring-your-shares-to-an-isa

There are special rules allowing you to transfer sharesave shares to an ISA but you must do the transfer within 90 days of exercising your option to buy the shares. This would protect £15000 worth of shares from CGT even if you sell the shares as soon as they are in the ISA. If you've missed that 90 day window, Bed and ISA will not help, in fact it counts as a sale and will cause an immediate gain using part of your CGT allowance.

So, if you have missed that 90 day window, follow the advice in post #2 above. Sell some shares now to create a gain of £11,000* and do the same again after 5th April.

If you have a spouse you can transfer some shares to him/her and they can sell to make a gain of £11,000* using their CGT allowance.

What was the option price of a single share, and what is the share price now? We can use those figures to work out how many you can sell.

You may be tempted to hold on to the shares if they're rising, just remember they could fall or crash just before you need the money for your house.

*CGT allowance is £11,000 for 2014/15, then £11,100 for 2015/16

flopsy1973

thanks for that. The link you supplied does not appear to be working at moment !!! so there is no way i can bed and isa shares i have received from a sharesave scheme? cant find the exact option price at moment but it was around £1.46 and today they are around £7.70. I dont really want to sell them at the moment as i think the prospects are good and they have further to go, i was just hoping to shelter them from the taxman

Gadfium

Yes you can Bed & ISA the shares, by requesting a Bed & ISA from your share holder (or transfer the shares to another company and request it from them). This assumes that you have not used your ISA allowance this year.

You could Bed & ISA about 1760 shares (based on the prices above) without realising a gain of more than £11000 in this tax year. And then repeat the process in April when you get your new ISA allowance. They would then be protected from future gains and future dividends received would also be tax free.

Based on £7.70 per share and your holding of £46K, you have about 5977 shares. Using Bed & Isa you could shelter more than half of these if you move fast.

flopsy1973

thanks so the previous post was incorrect regarding different rules for sharesave scheme shares ?

Vortigern

flopsy1973 wrote: »

thanks so the previous post was incorrect regarding different rules for sharesave scheme shares ?

No, my earlier post was not incorrect regarding the 90-day rule for sharesave to ISA transfers. The link to the gov.uk site should confirm that if you can get it to work. (The link still works for me)

The 90 day rule allows you to move shares from sharesave to ISA without having to sell and repurchase (known as Bed & ISA) and without using any of your CGT allowance.

The Bed & ISA process involves a sale and repurchase. The sale can give rise to a chargeable gain which will use part (or all) of your CGT allowance for the year. Bed and ISA will protect you from future gains, but not from the gain that you've already made.

I agree with Gadfium's estimate of 1760 shares to sell (or Bed/ISA) to use your CGT allowance.

I didn't say that you can't Bed & ISA, but I suggested that you simply sell the shares in tranches keeping within your CGT limits. if you wish to stay invested, you could buy a less risky investment with the proceeds of your sales, and within your ISA.

I don't know which company's shares you have, but holding shares in a single company is considered very risky and you really should diversify.

Gadfium

flopsy1973 wrote: »

thanks so the previous post was incorrect regarding different rules for sharesave scheme shares ?

No, it wasn't. Your assumption that you couldn't Bed & ISA was incorrect.

If you have unused ISA allowance left this year, then you might have time to Bed & ISA some shares. Only do this if you wish to hold them long-term though. Otherwise, just sell them up to your CGT allowance and stick the money into an ISA (assuming you wish to invest in funds), which will then give the money tax shielding for life.

eskbanker

flopsy1973 wrote: »

i have around 46,000k worth of shares

flopsy1973 wrote: »

as the shares were bought originally for around 9k i have made a gain

No kidding, you have apparently made a gain of 45,991,000, well done!

flopsy1973

Vortigern wrote: »

No, my earlier post was not incorrect regarding the 90-day rule for sharesave to ISA transfers. The link to the gov.uk site should confirm that if you can get it to work. (The link still works for me)

The 90 day rule allows you to move shares from sharesave to ISA without having to sell and repurchase (known as Bed & ISA) and without using any of your CGT allowance.

The Bed & ISA process involves a sale and repurchase. The sale can give rise to a chargeable gain which will use part (or all) of your CGT allowance for the year. Bed and ISA will protect you from future gains, but not from the gain that you've already made.

I agree with Gadfium's estimate of 1760 shares to sell (or Bed/ISA) to use your CGT allowance.

I didn't say that you can't Bed & ISA, but I suggested that you simply sell the shares in tranches keeping within your CGT limits. if you wish to stay invested, you could buy a less risky investment with the proceeds of your sales, and within your ISA.

I don't know which company's shares you have, but holding shares in a single company is considered very risky and you really should diversify.

sorry ye i misread your previous post thanks