Discussion
It was my understanding the advantage of Bed & ISA was not paying stamp duty on the re-purchase of the shares within the ISA wrapper.
That plus most places offering to do it for next to no trading fee / commission.
ETA
That plus most places offering to do it for next to no trading fee / commission.
ETA
Vanguard said:
The benefit of doing a Bed and ISA is that you won't pay capital gains tax on future gains your investments make. There won't be any personal income tax to pay either.
Remember - selling holdings in your general account could trigger a capital gain or loss and there may be tax to pay. However, you have a personal capital gains tax allowance of £12,000, there may not be any tax to pay.
https://www.vanguardinvestor.co.uk/need-help/answer/whats-a-bed-and-isa-and-how-do-i-do-itRemember - selling holdings in your general account could trigger a capital gain or loss and there may be tax to pay. However, you have a personal capital gains tax allowance of £12,000, there may not be any tax to pay.
Edited by emicen on Monday 10th August 13:48
emicen said:
hardly worth the hassle if thats all it does - thanksThere are stamp duty and dealing fees to pay.
In your example you gave a 40% profit. This means that 40% of whatever you sold would be subject to CGT (the rest being a return of capital).
So if you sold down £20,000 then £8,000 would be subject to CGT, but if you have not realised any other capital gains this tax year then this falls well within your £12,000 annual CGT allowance.
If this is the case, you may also want to consider selling down another £10,000 to max out your annual CGT allowance for this tax year. Remember the 30 day rule if you plan on repurchasing the same funds/stocks.
In your example you gave a 40% profit. This means that 40% of whatever you sold would be subject to CGT (the rest being a return of capital).
So if you sold down £20,000 then £8,000 would be subject to CGT, but if you have not realised any other capital gains this tax year then this falls well within your £12,000 annual CGT allowance.
If this is the case, you may also want to consider selling down another £10,000 to max out your annual CGT allowance for this tax year. Remember the 30 day rule if you plan on repurchasing the same funds/stocks.
JulianPH said:
There are stamp duty and dealing fees to pay.
In your example you gave a 40% profit. This means that 40% of whatever you sold would be subject to CGT (the rest being a return of capital).
So if you sold down £20,000 then £8,000 would be subject to CGT, but if you have not realised any other capital gains this tax year then this falls well within your £12,000 annual CGT allowance.
If this is the case, you may also want to consider selling down another £10,000 to max out your annual CGT allowance for this tax year. Remember the 30 day rule if you plan on repurchasing the same funds/stocks.
thanks - just starting to look at it really - hopefully i will need the advice in a few months but maybe not! didnt know the 30 day rule thanksIn your example you gave a 40% profit. This means that 40% of whatever you sold would be subject to CGT (the rest being a return of capital).
So if you sold down £20,000 then £8,000 would be subject to CGT, but if you have not realised any other capital gains this tax year then this falls well within your £12,000 annual CGT allowance.
If this is the case, you may also want to consider selling down another £10,000 to max out your annual CGT allowance for this tax year. Remember the 30 day rule if you plan on repurchasing the same funds/stocks.
I hope this is helpful clarification and not just confusing something that's already clear,
- The point of bed and ISA is either (a) to use your annual ISA allowance without needing to find any cash, and/or (b) to reduce the size of your taxable investments. It's just an expression people use - there are no specific tax loopholes.
- Bed and ISA is not subject to a 30 day rule. Similarly bed and SIPP is not subject to a 30 day rule.
- The 30 day buy-back rule isn't a "prohibition" - it's just that if you buy back too quickly (outside a tax wrapper like ISA or SIPP) your sale doesn't count as a sale. So you still don't want to do it.
- As per Julian's point above, bed and ISA can often be combined with using your annual CGT allowance.
This is perhaps a good place to ask a question that I have been pondering.
Suppose I have a significant sum in a specific asset in a non sheltered account, which has generated a capital gain, some available uninvested cash, and an unused ISA allowance.
I could obviously bed and ISA some of the asset that is in the un sheltered account, incurring CGT liability on the difference between the sale price and the average purchase price.
Is there anything to stop me buying more of that asset in the unsheltered account, thus raising the average purchase cost, and then bed and ISAing to the ISA limit?
This reduces the difference between the sale price and average purchase price of the asset, and so reduces the CGT liability I incur.
Is there a disadvantage to this approach apart from increased transaction costs?
Suppose I have a significant sum in a specific asset in a non sheltered account, which has generated a capital gain, some available uninvested cash, and an unused ISA allowance.
I could obviously bed and ISA some of the asset that is in the un sheltered account, incurring CGT liability on the difference between the sale price and the average purchase price.
Is there anything to stop me buying more of that asset in the unsheltered account, thus raising the average purchase cost, and then bed and ISAing to the ISA limit?
This reduces the difference between the sale price and average purchase price of the asset, and so reduces the CGT liability I incur.
Is there a disadvantage to this approach apart from increased transaction costs?
It sounds fine to me - although a tad unusual. I've not tried modelling figures but wouldn't it be a lot easier to realise enough B&B gain to use the CGT allowance and top up the rest of the ISA in cash? Clearly even in a 1,000% gain situation the B&B must, by definition, raise at least £12,300. You'll probably find you can even avoid the need to fill in a comprehensive CGT return with its required full supporting calculations...
(CGT return is some of the available Additional Pages to attach to a Self-Assessment return. It can pull people into a lot of extra paperwork, especially if they're usually just PAYE'd.)
(CGT return is some of the available Additional Pages to attach to a Self-Assessment return. It can pull people into a lot of extra paperwork, especially if they're usually just PAYE'd.)
rockin said:
I hope this is helpful clarification and not just confusing something that's already clear,
- The point of bed and ISA is either (a) to use your annual ISA allowance without needing to find any cash, and/or (b) to reduce the size of your taxable investments. It's just an expression people use - there are no specific tax loopholes.
- Bed and ISA is not subject to a 30 day rule. Similarly bed and SIPP is not subject to a 30 day rule.
- The 30 day buy-back rule isn't a "prohibition" - it's just that if you buy back too quickly (outside a tax wrapper like ISA or SIPP) your sale doesn't count as a sale. So you still don't want to do it.
- As per Julian's point above, bed and ISA can often be combined with using your annual CGT allowance.
petemurphy said:
thanks - just starting to look at it really - hopefully i will need the advice in a few months but maybe not! didnt know the 30 day rule thanks
As Steve has pointed out above, bed & ISA is not subject to the 30 day rule and I mentioned this rule only as part of my second point regarding any additional bed & breakfasting.It wasn't fantastically clear though.
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