Bed and ISA?

caz567

I've recently that it's possible to "Bed and ISA", which entails taking existing shares and putting them in an ISA. I'm thinking about doing this, but is there anything significant that I need to be aware of to sway me towards doing this or not doing this?

Are there any particular providers that are recommended for this? Do the charges outweight the tax advantages?

My own circumstances are that I have some Next shares that I've made quite a large capital gain on over the years and it's difficult to sell anymore than my annual CGT allowance in any one year. I think that if I put them gradually in an ISA then if I wanted to sell them all I could do so, without having a CG problem. However as far as I can see the providers charge an annual amount, plus I'd be selling at the lower of the bid/offer spread figure and having to buy back at the higher amount, thus losing a small amount. So I'm wondering do the tax advantages outweight these charges? Also, I should know the answer to this, but don't, are dividends within an ISA tax free or not?

I'd be grateful for any opinions/advice that you have to offer.

dunstonh

but is there anything significant that I need to be aware of to sway me towards doing this or not doing this?

The only negatives are that some may levy a charge for doing this and that you do create a chargeable event for CGT as the "bed" involves a sale as far as HMRC is involved. However, that can be quite useful as £7000 into a MAXI is less than the CGT personal allowance and do it every year and may end up never having to worry about CGT.

debbie42

caz567 wrote: »

However as far as I can see the providers charge an annual amount, plus I'd be selling at the lower of the bid/offer spread figure and having to buy back at the higher amount, thus losing a small amount. So I'm wondering do the tax advantages outweight these charges? Also, I should know the answer to this, but don't, are dividends within an ISA tax free or not?

I get charged £25 pa for my ISA with Selftrade, regardless of its value. You'd have to work out the calculation regarding CGT and spreads. You don't pay any extra tax on dividends in an ISA regardless of your tax status. One big plus (worth the £25 charge??) is that you don't have to fill in the details of ISA holdings etc. on a tax return.