Bed and ISA

AndyRat

I'm trying to research how to utilise Bed and ISA for some of my shares as now the levels of interest etc. that can be earned tax free has dropped again and I could potentially hit the 40% tax rate, I feel that it is time (probably well overdue!) to reduce my tax liabilities.

I'm also aware of the CGT liabilities as well, so am thinking that it might be best to transfer some of the share to my wife as well (and then potentially Bed and ISA these as well).

Most of the shares are from the "old" government sell-offs, BT etc. does anyone know how to calculate original costs particularly as I have acquired quite a few via scrip dividends etc.

What isn't clear to me is which companies offer Bed and ISA and how best to tackle this.

Appreciate that financial advice cannot be given, but if you have used Bed and ISA, who have you done it with?

Many thanks

eskbanker

There's nothing particularly special about Bed & ISA, it just streamlines three processes that can easily be done separately, i.e. sell units, move proceeds into ISA, then rebuy units, with any provider, so IMHO there isn't any need to identify specific providers that happens to bundle these together like that.

Identify your ISA provider based on things that matter, such as costs, range of investments, ease of use, customer service, etc, and take it from there.

In terms of ascertaining acquisition costs, there are no shortcuts, and you have to keep records to support your calculations, or at least be in a position to determine acquisition dates, from which costs can be derived.  If you've failed to do this, then the safest assumption is an acquisition cost of zero, i.e. equating gains to proceeds....

Voyager2002

You asked about transferring shares to your wife.I am unsure how this would help you. Suppose, for example, that your holding in BT shows a capital gain of £7,000. If you 'bed and ISA' then you sell your shares; pay whatever CGT is dues on that £7,000; pay the money you get from the sale of shares into your ISA and spend it on BT shares there. If you transfer the shares to your wife then you still pay CGT on the capital gain; the shares thereafter belong to her and she is the person responsible for paying income tax on any future dividends.That would only make sense if you have used up your ISA allowance and you want her to open her own ISA: or of course if you are feeling generous.

eskbanker

Voyager2002 said:

You asked about transferring shares to your wife.I am unsure how this would help you. Suppose, for example, that your holding in BT shows a capital gain of £7,000. If you 'bed and ISA' then you sell your shares; pay whatever CGT is dues on that £7,000; pay the money you get from the sale of shares into your ISA and spend it on BT shares there. If you transfer the shares to your wife then you still pay CGT on the capital gain; the shares thereafter belong to her and she is the person responsible for paying income tax on any future dividends.That would only make sense if you have used up your ISA allowance and you want her to open her own ISA: or of course if you are feeling generous.

No, transferring shares to a spouse doesn't crystallise capital gains until she sells them, at which point it's the original acquisition cost that applies, so splitting assets across a married couple does allow use of both CGT allowances in the way OP envisages.

https://www.gov.uk/capital-gains-tax/gifts

Beddie

I did the same thing last tax year, with mostly old privatisation and demutualisation shares too. I used a base cost of nil to make sure I definitely didn't have any CGT to pay. At least the allowance was still £6k. 

Bed and ISA is not a specific process offered by any company - it's just you selling your shares and adding the proceeds in cash to an ISA. Up to you if you buy the same shares or go for something else. And yes, transfer some to your wife to double up the allowances.