Bed & ISA-To do or not to do

lindabea

COLDIRON -  Regarding this comment you made -  'Yes but 1) it's probably not that significant unless you had a very large holding',

I'm not sure I understand what you mean.  Why is the loss only significant for a very large holding.  Surely the loss is dependent on the variant between the acquisition cost and the selling price.  So if you bought at £200 and selling at £190, your loss on the transaction is 5% per unit sold.  But this is nothing to do with the overall size of your holding - but more on the number of units you are selling.  The greater the number of units sold, the greater the loss amount, but always at a rate of 5% of the total acquisition cost (as in this example)  

Eco_Miser

lindabea said:

COLDIRON -  Regarding this comment you made -  'Yes but 1) it's probably not that significant unless you had a very large holding',

I'm not sure I understand what you mean.  Why is the loss only significant for a very large holding.  Surely the loss is dependent on the variant between the acquisition cost and the selling price.  So if you bought at £200 and selling at £190, your loss on the transaction is 5% per unit sold.  But this is nothing to do with the overall size of your holding - but more on the number of units you are selling.  The greater the number of units sold, the greater the loss amount, but always at a rate of 5% of the total acquisition cost (as in this example)  

For the purposes of offsetting a loss against future capital gains, only the number of pounds is relevant, so unless you had a large holding, the number of pounds lost would be fairly insignificant (in COLDIRON's opinion).

Going back to your original question, the lower the price at which you Bed & ISA the better, within reason - less Capital Gain and lower fees if they're a percentage.

ColdIron

lindabea said:

COLDIRON -  Regarding this comment you made -  'Yes but 1) it's probably not that significant unless you had a very large holding',

I'm not sure I understand what you mean.  Why is the loss only significant for a very large holding.  Surely the loss is dependent on the variant between the acquisition cost and the selling price.  So if you bought at £200 and selling at £190, your loss on the transaction is 5% per unit sold.  But this is nothing to do with the overall size of your holding - but more on the number of units you are selling.  The greater the number of units sold, the greater the loss amount, but always at a rate of 5% of the total acquisition cost (as in this example)  

I'd leave units out of it, they are just a unit of accounting and only serve to muddy the waters. It's the value (pounds) that matter

It wasn't an important point but what I'm getting at is:

Say you had a bit over £20K in your GIA that you wanted to tuck away in an ISA. Using your 8% loss scenario you would sell £20K of fund(s) (that cost you £21,740) and record the loss but you wouldn't have much of anything left in the GIA to offset the loss against

Say you had £40K or so and were in the second year and wanted to Bed & ISA the remainder. You would have to be doing very well to exceed the £6,000 allowance (remember it's reducing 2023/24), a 42% increase from £14,000 to £20,000. Still not very useful in most real life scenarios

It's only with larger portfolios, where it could take many years to tuck all the unwrapped investments away in an ISA, that you would have (with luck) gains in excess of the allowance (even at £3,000) to offset the loss against

In summary, recording losses for small holdings isn't very useful (as you won't have anything to offset them against), they become much more useful the more you have

Edit: Upon reflection I should have said larger rather than very large

GeoffTF

lindabea said:
Suppose I have VLS 80% acc fund in an ISA and VLS 80% inc fund in a GIA.  If I sell 20K worth of units from the GIA, and buy the equivalent units in the ISA, are you saying that's not a bed & ISA?   

No, that would not be a bed & ISA. If you instruct your broker to bed & ISA VLS 80 income, he will typically sell the VLS 80 income units, pay whatever the proceeds turn out to be into the ISA, without waiting for settlement, and buy the same number of units VLS 80 units at the same price. You will usually be charged only one commission rather than two.

If you have enough cash to cover the purchase within the ISA, you can do a sale outside the ISA and a purchase within the ISA at the same pricing point. If you sell income units outside the ISA and buy accumulation units within the ISA at the same pricing point, you could get stung by swing pricing. You could lose out if there is a big excess of sellers for the units that you sell, and a big excess of buyers for the units that you buy. That probably will not happen with income and accumulation units in the same fund, but is much more likely if you are buy an entirely different fund to that which you sold.