Bed and ISA with Bonds

Nardy

Hello Investors,

I have a question, I'm used to Bed and ISA for transferring shares in funds and shares in individual companies from General Accounts to an ISA. Is it as simple with Bonds? I've avoided Bonds until now, but something over over on ii has caught my eye. I'm thinking of investing about £5,000 in some bonds. This transaction needs to be completed in March, before the end of the current financial year. Once the new financial year starts, can I use the Bed and ISA route to transfer them from my general account to my ISA?

eskbanker

https://www.ii.co.uk/ii-accounts/isa/bed-isa makes no reference to any restrictions on specific types of investment, so I can't see any reason not to use the process for bonds as well as shares or funds.

However, it's just a bundling of two steps, and if the combined process wasn't available for whatever reason, they can still be executed individually.

dunstonh

Is it as simple with Bonds?

bonds or bond funds?

bond funds - yes

bond funds - if they are tradeable and liquid (so same as shares)

Nardy

Thanks.

I think the question I should have asked is, "is the process of selling bonds on one day and buying them back a day later as smooth as it is for shares?"

jimjames

Is there any point? If the money isn't in a tax shelter now then can't you just keep as cash until April and then pay it into the ISA? You'll get a guaranteed rate up to 4.5% on cash savings which probably beats bonds over that timescale

poseidon1

If you have ever bought and sold any bond ( corporate or gilt ), you will be familiar with the accrued income scheme for income tax compliance purposes.

So on the sale side of things unless you are selling 1 day after the interest is due, you will trigger taxable accrued income on your sale. So you will have an income tax liabilty on interest built into your sale proceeds. If you just want to buy back the same nominal bond in the ISA, how much that will cost will depend if you sell at a loss or gain compared to your original acquistion cost.

On the buy side ( in ISA ) you will have accrued income purchased which artificially inflates the book cost of the bond in the ISA. Not a big deal overall since you will eventually get the interest back on the next interest paid date, but you bond will always look as if it is eventually disposed of at loss if kept until redemption, depending on the amount of accrued income and if the buy price is above par. Obviously, if selling to the ISA under par the opposite may be true.

For this reason , more difficult ( if not impossible ) to mirror the B & B sale/ purchases of bonds in the same way as shares.

I did it, nonetheless, to move a large high yielding corporate bond CGT free out of a GIA, to shelter the future interest from tax, but accepted the eventual capital loss incurred in the ISA on redemption.

NotDeniseCoates

https://forums.moneysavingexpert.com/discussion/6656614/bed-and-isa-with-bonds

I've been looking for a decent bond fund care to share?

aroominyork

https://forums.moneysavingexpert.com/discussion/comment/81896742#Comment_81896742

I suggest you start a new thread so you can explain the type of fund you are after: government or corporate? investment grade or high yield? active or passive? developed or emerging markets? hedged or unhedged?

Nardy

https://forums.moneysavingexpert.com/discussion/comment/81896691#Comment_81896691

This is what I am referring to.

https://www.ii.co.uk/ipo/offer-information/sfi

Nardy

There is a month between purchase and the start of the new financial year when I can transfer them to my ISA.

poseidon1

https://forums.moneysavingexpert.com/discussion/comment/81897129#Comment_81897129

I suspect you are not an experienced investor in corporate bonds, and it is the 7.5% coupon on offer over a 3 year period, that caught your attention.

However, what due diligence have you done on the sponsoring company (Triple Point Private Credit) and what did you gather from their business model that made you so confident the bond might not go belly up before the end of the 3 year period?

This is an highly unusual bond issue in that unlike normal bonds issued by 99% of quoted LSE companies, this does not payout any interest ( at all) until the end of the bond term.

For experienced retail corporate bond investors this would be unacceptable, since the only idea that the bond might be heading for a default on its interest payments is at the end of term, compared to the normal 6 monthly interest payment cycle offered by most companies.

If you are nonetheless going to subscribe to this offer, then at least have a read of the following article to get an inkling of what you are getting into.

https://www.thearmchairtrader.com/bond-market-news/triple-point-tests-retail-appetite-with-7-5-secured-bond-debut/

I am no shrinking violet when it comes to taking risks with bonds ( my last remaining one pays 12%), and I bemoan the fact the LSE ORBs market as pretty much shrivelled up, but I certainly wouldn't go any where near this offering from Triple Point.