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The Transfer Shares into ISA Option: 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! The transfer shares into ISA option is possible, but only by first 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’s an indirect way of moving shares into an 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 for transferring shares into an ISA, and not only shares but any assets held outside an ISA. It begins with the sale of the assets. The sale of investments that occurs in a dealing account may lead to capital gains tax if the profit exceeds the annual allowance. However, no tax is due if the gain is within the allowance. 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. But on the sales side of transferring shares into ISA, capital gains might be realised.

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 make use of the transfer shares into ISA option? The answer to that question 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 take up the transfer shares into ISA option, 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. However, this strategy’s effectiveness is bounded by the annual ISA contribution limit, which restricts the amount that can be moved into an ISA each tax year.

HMRC only permits cash contributions to ISAs, so it is not possible to transfer shares to an ISA directly. HMRC insists on this so that they can monitor your annual contributions and ensure you don’t exceed your £20,000 cap. The price fluctuations of non-ISA equities and shares, along with possible exchange rates and bid-offer spreads, would complicate things if you simply transferred them in.

If the value of your transfer shares into ISA option 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 include in my transfer shares into ISA option?

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

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).

You can also transfer SAYE shares to ISA accounts. SAYE shares, which stand for ‘Save As You Earn’ (SAYE or Sharesave) schemes, are savings-related share option schemes. Employees receive ‘share options,’ which are used to buy shares using the amounts saved under a specific Save As You Earn (SAYE) savings contract.

If you want to find out more about how to transfer SAYE shares into an ISA, start with our employer to see it they will allow it.

Taking the transfer shares in ISA option and 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. If you do decide to go for the transfer shares into ISA option, 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

Can I move shares into an ISA?

Not directly, but you can do it via the Bed and ISA process, which involves first selling the shares held outside an ISA, investing the money in an ISA, and then using it to repurchase said shares within the ISA.

What happens if I exceed my ISA allowance with a Bed and ISA?
Exceeding your ISA allowance can result in tax penalties. Calculating carefully is important 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 duration of the process 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.

Can I transfer shares into an ISA without selling them?

No, you can only invest money into an ISA. If you take the transfer shares into ISA option, the shares must first be sold, then repurchased within the ISA – a process referred to as Bed and ISA.

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