'Bed and ISA' explained: moving investments without the tax sting

Plenty of people hold investments outside an ISA that they would rather hold inside one. The obstacle is that moving them is not a transfer — it is a sale and a repurchase, and the sale is a taxable event.

"Bed and ISA" is the name for doing that deliberately and carefully.

The mechanics

The process is simple in outline:

1. Sell an investment held in your general investment account.
2. The proceeds move into your ISA, using that year's allowance.
3. The same investment is repurchased inside the ISA.

Most platforms offer this as a single instruction, and because the repurchase happens inside an ISA, the 30-day matching rule that blocks a simple sell-and-buy-back does not frustrate it in the same way.

From that point on, all future growth, dividends and gains on the holding sit outside the reach of capital gains and dividend tax, permanently.

What it costs

Three things, and they should be counted before starting.

Capital gains tax on the sale. This is the main cost, and the main reason for care. The disposal counts toward your annual exempt amount for the year.

Dealing charges. Usually one sale and one purchase, though some platforms discount or waive the repurchase side for Bed and ISA specifically.

Time out of the market. The gap between sale and repurchase is usually short, but it is not always instantaneous, and prices move.

A worked example

An investor holds a fund in a general account worth £16,000, bought for £11,500. The unrealised gain is £4,500. They are a basic-rate taxpayer and have used none of this year's exemption.

Moving it all at once: gain £4,500, less the £3,000 exemption, leaves £1,500 taxable. At 18%, that is £270 of tax to shelter the holding permanently.

Splitting across two tax years: roughly £2,250 of gain realised in each year, both within the annual exemption. Tax: nothing. The holding is fully sheltered by the second April, at the cost of waiting.

Which is better depends on the size of the gain, how long you are willing to take, and whether you have other disposals competing for the same exemption.

When it makes sense

The case is strongest when the holding produces meaningful dividends, when you expect to hold it for many years, when the unrealised gain is modest relative to the exemption, and when you have unused ISA allowance you would otherwise waste.

It is weaker when the gain is large enough to generate real tax, when you might sell the holding soon anyway, or when the ISA allowance has a better use — new money you were going to invest regardless.

The points people miss

It uses ISA allowance. £16,000 moved is £16,000 of the £20,000 gone. If you were also planning to contribute new savings, they compete for the same space.

Spouses have their own exemption and allowance. Transfers between spouses and civil partners are generally made on a no gain, no loss basis, which opens planning options that a single person does not have.

Timing around 5 April is the whole game. Doing it in late March and early April uses two years' exemptions within a fortnight. Doing it in June commits the whole gain to one year.

Your cost base needs to be accurate. The tax depends on what you paid, including accumulated income reinvested over the years. Poor records tend to produce overstated gains and overpaid tax.

Sources

• HM Revenue & Customs — Capital Gains Manual: share identification rules, accessed August 2026.
• HM Revenue & Customs — Manage ISA subscriptions for your investors, accessed August 2026.
• HM Revenue & Customs — Capital Gains Tax rates and allowances, accessed August 2026.

Last reviewed: 2 August 2026 · Figures reflect the 2026/27 UK tax year.

This article is general educational information about UK tax and investing rules. It is not personal advice or a recommendation, and it does not take account of your circumstances. Tax treatment depends on individual circumstances and may change. Figures reflect our understanding of the rules for the 2026/27 tax year at the date of publication. If you are unsure, consider speaking to an adviser authorised by the FCA.