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Transfer shares into ISA: moving shares into an ISA


Can I transfer shares into an ISA? Yes! While there are many different types of ISAs, Stocks and Shares ISAs are one of the best ISAs because of how flexible they are. When choosing between SIPPS or ISAs, such as a cash ISA, to start saving for your retirement, consider the multitude of ISAs that are available and the benefits they offer. Please note that Moneyfarm does not facilitate the Bed and ISA process. Therefore, it is not possible to execute a Bed and ISA transaction directly through Moneyfarm.

For instance, if you possess investments outside of a Stocks and Shares ISA and wish to leverage the tax benefits, which are the primary advantage of ISAs vs Savings Accounts, you can transfer non-ISA shares into an ISA using a Bed and ISA process. Once your investments are in a Stocks and Shares ISA, they become completely exempt from taxes. Nevertheless, it’s crucial to first learn the procedure for transferring shares into an ISA.

The content in this article is intended purely for informational purposes only and should not be interpreted as Moneyfarm endorsing or offering this service.

Can you transfer shares into an ISA?You can transfer shares into your Stocks and Shares ISA through a Bed and ISA
Can I transfer shares worth more than £20,000?HMRC has set a limit of £20,000 per person when it comes to transferring shares into an ISA,
What is a Bed and ISA?An investment vehicle sold in a dealing account and purchased in an ISA

Can you transfer shares into an ISA?

Yes! Transferring shares into ISA accounts is possible. Selling them, adding the money to your ISA, and then repurchasing them inside of your ISA is the ideal approach to transferring your non-ISA shares and investments into an ISA. It is known as a Bed and ISA. It is also possible to combine ISA transfers, though the approach is a bit different.

How do I transfer shares into an ISA?

The “Bed and ISA” process is a strategy used in the UK to shift shares into a tax-efficient Individual Savings Account (ISA). It begins with the sale of investments held outside of an ISA. The sale of investments that occurs in a dealing account may lead to capital gains tax if the profit exceeds the annual allowance. However, if the gain is within the allowance, no tax is due. The proceeds from this sale are then immediately used to repurchase the same investments, but this time within an ISA.

There is less vulnerability to market fluctuation because the two transactions are completed concurrently. The costs subtracted include stamp duty and the dealing fee. The difference between the market buying and selling price may cause the number of shares purchased in the ISA to be less than the number of shares sold in the dealing account.

The primary benefit of Bed and ISA is the movement of assets into a space where they can grow free from UK tax on capital gains and income, making it a popular tactic for maximising tax efficiency in investment portfolios. Shares, investment trusts, trackers, bonds, and other types of investments are all eligible for bed and ISAs, but funds are not one of those products (unit trusts and OEICs).

Can I transfer shares worth more than £20,000?

Can I transfer existing shares into an ISA? The answer to that is that it depends on how much they are worth! HMRC has set a limit of £20,000 per person when it comes to transferring shares into an ISA, just like when it comes to putting money into your ISA account according to your ISA allowance or withdrawing money from your ISA.

Just so you know, if you want to transfer shares into an ISA, normal shares and investments cannot be transferred straight into an ISA, but you can sell and buy them again within your ISA account to benefit from the ISA tax benefits. The effectiveness of this strategy is, however, bounded by the annual ISA contribution limit, which restricts the amount that can be moved into an ISA each tax year.

HMRC only permits contributions into ISAs in cash. This is necessary so that they can monitor your annual contributions and ensure that you don’t go over your £20,000 cap. The price fluctuations of non-ISA equities and shares, along with possible exchange rates and bid-offer spreads, would make things complicated if you simply transferred them in.

If the value of your existing shares exceeds £20,000, you are only permitted to contribute up to £20,000 worth of shares to an ISA in a single tax year. You won’t have to pay off your entire CGT liability at once if you have one because you simply need to sell £20,000 worth of your holding in order to accomplish this. Then, by completing a Bed and ISA each year, you can divide your CGT tax obligation over a number of tax years.

What types of shares can I transfer into an ISA?

A stocks and shares ISA can be used as a “tax wrapper” for a variety of different investment products. Within a Stocks and Shares ISA, all investment growth and interest are tax-free.

An ISA for stocks and shares may contain a variety of investment instruments, such as:

  • unit trusts
  • investment trusts
  • exchange-traded funds
  • individual stocks and shares
  • corporate and government bonds
  • OEICs (Open Ended Investment Companies).

Supplementing your income in retirement

Ensuring you have enough income when you retire is essential. Your state pension alone is very unlikely to suffice. You might also have a workplace pension, SIPP, and some dividend-paying shares. All of these can provide you with income in your retirement, but by the time you add them all up and include your state pension, your total income will likely be subject to income tax.

You may need to supplement your retirement income with an investment ISA. Now you know the answer to the question “Can I transfer shares into an ISA?” is yes, it should be worth considering. You can transfer most types of shares, including ones that pay a regular dividend, and by so doing, this element of your income will be tax-free.

Of course, you’ll need to have a substantial number of stocks to give you a significant dividend income. But as your ISA allowance is capped at £20,000 per annum, if the sum of the total value of the shares you hold is higher than the allowance, you’ll need to schedule a Bed and ISA exercise every year until you’ve moved all your shares into your tax-free ISA.

FAQ

What happens if I exceed my ISA allowance with a Bed and ISA?
Exceeding your ISA allowance can lead to tax penalties. It’s important to calculate carefully to ensure you don’t exceed the annual ISA limit.

Can I transfer investments to an ISA in my spouse’s name?
Unfortunately, you cannot transfer your investments directly into an ISA in someone else’s name, including your spouse. ISAs are individual accounts.

How long does the Bed and ISA process take?
The process duration can vary depending on your broker or platform. It’s usually completed within a few days, but it’s best to check with your provider.

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*Capital at risk. Tax treatment depends on your individual circumstances and may be subject to change in the future.