Bed and ISA

[548834]

I've got into the habit each new Tax year to sell from my Share account and repurchase within my S&S ISA sufficient S&S to utilize my CGT allowance.

I came across this quote on https://www.barclaysstockbrokers.co.uk/ ... -tips.aspx

"Remember the “Bed & ISA” route is no longer available for you to rearrange your assets to crystallise gains, so repurchasing the same stock immediately after selling it isn’t an option; you need to leave at least 30 days following the disposal before you invest in the same asset again. Of course this opens you up to movements in the market.

When you’re ‘out of the market’, you won’t hold some or all of your investments and you’ll lose out on:"

Not sure I understand the meaning. I was under the impression that S&S ISA were exempt from CGT.

[genou]

I've got into the habit each new Tax year to sell from my Share account and repurchase within my S&S ISA sufficient S&S to utilize my CGT allowance.

I came across this quote on https://www.barclaysstockbrokers.co.uk/ ... -tips.aspx

"Remember the “Bed & ISA” route is no longer available for you to rearrange your assets to crystallise gains, so repurchasing the same stock immediately after selling it isn’t an option; you need to leave at least 30 days following the disposal before you invest in the same asset again. Of course this opens you up to movements in the market.

When you’re ‘out of the market’, you won’t hold some or all of your investments and you’ll lose out on:"

Not sure I understand the meaning. I was under the impression that S&S ISA were exempt from CGT.

The part you quote is from Step 4. They've already performed a B&I in Step 3, hence that route is "no longer available".

ISAs are indeed outside CGT.

[Gengulphus]

I came across this quote on https://www.barclaysstockbrokers.co.uk/ ... -tips.aspx

"Remember the “Bed & ISA” route is no longer available for you to rearrange your assets to crystallise gains, so repurchasing the same stock immediately after selling it isn’t an option; you need to leave at least 30 days following the disposal before you invest in the same asset again. Of course this opens you up to movements in the market.

When you’re ‘out of the market’, you won’t hold some or all of your investments and you’ll lose out on:"

Not sure I understand the meaning. I was under the impression that S&S ISA were exempt from CGT.

They are.

My guess is that "Bed & ISA” in that passage was intended to be "Bed & Breakfast", as everything the passage says is true of bed-and-breakfasting. Genou's theory is possible, but if so, I reckon the point is rather badly made - something like "Remember you've already used your ISA allowance in step 3, so the "Bed & ISA" route isn't available to you and repurchasing ..." would be much clearer.

But my guess is only a guess, so if I were a Barclays Stockbrokers client and I cared about the answer, I would probably send them a message querying it!

Gengulphus

[Lootman]

Genou's theory is possible, but if so, I reckon the point is rather badly made - something like "Remember you've already used your ISA allowance in step 3, so the "Bed & ISA" route isn't available to you and repurchasing ..." would be much clearer.

I agree that would be a better phrasing but it's still a little misleading in my opinion. It implies that you can only "Bed and ISA" if you are in a position to subscribe to this year's ISA.

But that's not true. I can "Bed and ISA" at any time even if I have made my full ISA contribution for this year. I can use accumulated cash in the ISA to repurchase the share I am selling in my taxable account. Or I could sell something in the ISA and use those funds (if necessary, repurchasing that sold share in my taxable account).

So there is no limit to how much you can "Bed and ISA" in a year, other than practical and cost considerations. Barclays are presumably talking only about a special facility they offer to "Bed and ISA" where they save you a commission or otherwise get some kind of discount.

[air04]

I contacted them online as a complaint(really a feedback) on 26th April, they came back in email with

I'm pleased to tell you our website has now been updated and I'd like to thank you for bringing this to our attention.

[Gengulphus]

My guess is that "Bed & ISA” in that passage was intended to be "Bed & Breakfast", as everything the passage says is true of bed-and-breakfasting. ...

It seems that I was right - I've just looked at https://www.barclaysstockbrokers.co.uk/ ... -tips.aspx again to check up on another point about what it said, and "ISA" has been changed to "Breakfast" in the passage concerned. Probably a matter of them getting a whole lot of "What???" messages from readers who had been bed-and-ISAing, but weren't sufficiently confident in their knowledge that it works to know that the statement that it was no longer available had to be erroneous!

Genou's theory is possible, but if so, I reckon the point is rather badly made - something like "Remember you've already used your ISA allowance in step 3, so the "Bed & ISA" route isn't available to you and repurchasing ..." would be much clearer.

I agree that would be a better phrasing but it's still a little misleading in my opinion. It implies that you can only "Bed and ISA" if you are in a position to subscribe to this year's ISA.

But that's not true. I can "Bed and ISA" at any time even if I have made my full ISA contribution for this year. I can use accumulated cash in the ISA to repurchase the share I am selling in my taxable account. Or I could sell something in the ISA and use those funds (if necessary, repurchasing that sold share in my taxable account).

Had Genou's theory been correct, the author would have considered "Bed & ISAing" to consist of the three steps of selling outside, subscribing and buying inside, and so they would say that Lootman had a valid point that one could get the same CGT benefits that "Bed & ISAing" provides by other routes, but that those other routes weren't actually "Bed & ISAing" as they understood the phrase.

They could also point out that if one wants the phrase to describe any activity that gets the same CGT benefits as "Bed & ISAing", then actually the ISA isn't needed - one can use a SIPP in its place - so maybe Lootman should be calling it "Bed & Sheltering" instead of "Bed & ISAing"?

And then I could be a smart aleck and point out that what one uses in place of an ISA needn't be a tax shelter - it can also be a spouse, a civil partner or a trust, or quite possibly other things I haven't thought of offhand. So "Bed & Sheltering" isn't really a fully general description either... All that really matters is that you repurchase in something that is a separate entity for tax purposes, but that you effectively beneficially own and control. ("Effectively" because in legal terms, you of course neither beneficially own nor control a spouse or civil partner - but in practice either you effectively do so with regard to the assets concerned, or the CGT benefits are no longer free of significant financial risk.)

None of that is meant to disagree with Lootman's point, but just to say that when suggesting a rephrasing of someone else's point, one should take care to limit the suggestion to wording that expresses their point. Had Genou's theory been correct, the author's point would have been that the ISA allowance limits the use of "Bed & ISAing" in the sell outside/subscribe/buy inside sense, and my rephrasing would have said that. (Though of course as it actually turns out and I suspected, their actual point had nothing whatsoever to do with ISAs.)

One is of course free to suggest making a different point, but that's actually changing the meaning of what they're saying, and so is best described as a suggested content change rather than just a suggested rephrasing. And it's a good idea to take rather more care about suggesting content changes than rephrasings, as they're liable to open bigger cans of worms...

The other thing that emerges from it is that it would probably be useful to have a less cumbersome term than "Bed & ISA/SIPP/spouse/civil partner/trust/etcing" for the fully general technique! ;-)

Gengulphus

[genou]

Had Genou's theory been correct, the author would have considered "Bed & ISAing" to consist of the three steps of selling outside, subscribing and buying inside, and so they would say that Lootman had a valid point that one could get the same CGT benefits that "Bed & ISAing" provides by other routes, but that those other routes weren't actually "Bed & ISAing" as they understood the phrase.

The point I was trying to make was that most brokers, in my experience, will give you a cheap deal to move shares into your ISA up to, but not more than, your available ISA subscription. And that is what they mean by "Bed and ISA " .I made the, possibly unjustified, leap that the OP's broker took the same view.

If you want to move shares ad-lib that is , again in my experience, a "matched bargain" regardless of the source and destination. One of my brokers will do this on cheaper terms, the other will not.

[Gengulphus]

The point I was trying to make was that most brokers, in my experience, will give you a cheap deal to move shares into your ISA up to, but not more than, your available ISA subscription. And that is what they mean by "Bed and ISA " .I made the, possibly unjustified, leap that the OP's broker took the same view.

Actually I would say that the possibly unjustified leap in that is that everyone in a large organisation means the same thing when they use the same words...

But the real 'leap' turns out to have been that they actually meant "Bed & ISA" at all - the revision to say "Bed & Breakfast" instead makes it pretty plain that they didn't. But that 'leap' is entirely justifiable, simply because it's impossible to go through life without very frequently assuming that people mean what they say! The most you can do is keep an eye open for signs that they don't, such as what they say not really making sense, and even when one spots such signs, it's often a matter of luck whether you spot what they actually do mean. And how quickly you spot it if you do, even if it's very simple - for instance, I know I've sometimes spent quite a long time puzzling over what someone means before eventually realising that they've simply inadvertently left the word "not" out of what they've typed...

Gengulphus

[MuddyBoots]

Next April I'll be using my ISA allowance by moving some unit trust units from a non-ISA investment account into an ISA. Bed and ISA seems to be the best option, but I don't understand why I need to sell the units at all; can't I just move them across (they're staying in the same fund) without crystallising? I think that capital gains is calculated when an asset is sold, so it seems inefficient to sell and buy back exactly the same asset!

Or is that regarded as a tax dodge too far by the authorities so they close this option? What's slightly freaking me out is the CGT allowance halving next year to £3k. If it stays at that level (and it won't be a priority for Labour if they win the election), it represents a 15% gain per £20k annual ISA allowance which may occur in a good year for shares. Would I then have to fill in a tax return, something I've never done before?

Or maybe in those circumstances it would make more sense to transfer just enough stay within my CGT allowance and not use all my ISA allowance?

[XFool]

Next April I'll be using my ISA allowance by moving some unit trust units from a non-ISA investment account into an ISA. Bed and ISA seems to be the best option, but I don't understand why I need to sell the units at all; can't I just move them across (they're staying in the same fund) without crystallising? I think that capital gains is calculated when an asset is sold, so it seems inefficient to sell and buy back exactly the same asset!

Because the existing rules for ISAs are that you can only make a cash contribution into an ISA (apart from special considerations wrt share ISAs and company share saving schemes).

[88V8]

Or maybe in those circumstances it would make more sense to transfer just enough stay within my CGT allowance and not use all my ISA allowance?

Your tax shelter is the gift that keep on giving, whereas CGT is a penalty you pay only once.

You could of course add new money to use your ISA allowance, and I think it most advisable that one should do so.

V8

[Alaric]

Or maybe in those circumstances it would make more sense to transfer just enough stay within my CGT allowance and not use all my ISA allowance?

CGT is on the net gain, not the proceeds.

The optimisation is to sell enough to raise £ 20,000 or as much as needed if there's other funds available whilst keeping the gain (proceeds minus buying costs) within the CGT limit..

What some of us do is to sell late in the "old" tax year, hold cash for a day or two and make the transfer and repurchase in the "new" tax year. There's more point to doing this with a share porfolio as you never know when a compulsory takeover is going to appear.