Bed and ISA vs new ISA - ii 30 March 2022 at 8:41PM edited 30 March 2022 at 9:56PM in ISAs & tax-free savings 4 replies 132 views

Wobble101

I’ve been fortunate enough to be able to max out my ISA allowance for 21/22 and have been putting c £500 per month extra into a GIA account with ii. With the new financial year approaching I’m interested in the pros and cons of: 

1. Opening a new S&S ISA with ii and adding my monthly amounts into that and leaving my GIA as it is for now  

Vs 

2. Using the ii bed and ISA facility to transfer £20k of my GIA into an ISA and continuing to add additional monthly sums into my GIA

The only key difference I can see is that the option 1 takes a long time to build up while option 2 is in the market for longer in an ISA wrapper.

The money is in Vanguard LS 60 & 40. I’d be looking on drawing it out in the next 5-8 years as part of an early retirement plan.

Thoughts welcome. Many thanks.

jimjames

I can't see any reason to sell and rebuy if you are going to fill your ISA with new cash anyway this year so I'd leave the GIA as is.

eskbanker

How much above £20K is in the GIA and what chargeable gains have accrued thus far?  Selling from it and rebuying within the ISA has the benefit of crystallising any gains, which can be used to minimise CGT liability if kept within the annual CGT threshold....

Wobble101

@eskbanker Just over £50k. I only opened the GIA last year and sadly the recent fall in the stock market has me at just under 1% in profit. So not much of a gain to crystallise sadly.

I’ve realised that we also have my husband’s ISA allowance as well so I could move £20k into that but perhaps the bed and ISA (why on earth is it called that?) isn’t possible when the destination ISA is not in your name. 

eskbanker

Wobble101 said:

I’ve realised that we also have my husband’s ISA allowance as well so I could move £20k into that but perhaps the bed and ISA (why on earth is it called that?) isn’t possible when the destination ISA is not in your name. 

'Bed & ISA' stems from 'bed & breakfast', a more generic term used for selling assets and repurchasing the next day in order to circumvent CGT, a loophole which was effectively prohibited when the 30-day rule was introduced, meaning that such swift repurchases were matched against the disposals to negate the crystallisation benefit.  The 'bed & ISA' refinement is effectively just shorthand for selling assets and repurchasing within an ISA, which still does have the effect of crystallising gains for CGT purposes - even though you couldn't directly 'bed & ISA' from one person's GIA into another's ISA, there's nothing stopping you from executing those two transactions separately.