Bed and ISA: using your CGT allowance before the tax year ends

Bed and ISA is the practice of selling investments you hold outside a tax wrapper and immediately buying them back inside an ISA. The holding is unchanged. What changes is that all future growth, dividends and interest are permanently out of the reach of tax.

It used to be a refinement for larger portfolios. With the capital gains annual exempt amount cut to £3,000, it has become something close to routine housekeeping for anyone holding investments in a general account.

At a glance

How Bed and ISA works

The mechanics are straightforward, and most platforms will run the whole thing as a single instruction:

1. You sell a holding in your general investment account. This is a disposal for capital gains tax purposes, and any gain counts against your annual exempt amount.
2. The cash moves into your ISA, using part of your £20,000 annual ISA allowance.
3. The same investment is repurchased inside the ISA, usually within minutes.
4. From that moment, all future gains and income on the holding are tax-free.

The point is to realise a gain deliberately, in a year and at a size you control, and use an allowance that would otherwise be wasted — while moving the asset somewhere it will never be taxed again.

Why the 30-day rule does not block it

This is the question everyone asks, and the answer is the reason the technique works at all.

The "bed and breakfasting" rules were introduced to stop people selling an asset purely to crystallise a gain or loss and buying it straight back. If you sell and repurchase the same asset in the same capacity within 30 days, the disposal is matched against the repurchase and the intended tax effect is denied.

An ISA is a different capacity. The repurchase is made by the ISA, not by you personally, so the shares sold and the shares bought are not matched. The disposal stands, the gain is realised, and the allowance is genuinely used.

The same logic is why Bed and Spouse works — selling and having a spouse repurchase — and why Bed and SIPP works for a pension. What does not work is selling and buying back yourself within 30 days.

Worked example

Ellen holds £30,000 of a global equity fund in a general account. She originally invested £22,000, so she is sitting on an £8,000 unrealised gain.

She sells enough to realise exactly £3,000 of gain — around £11,250 of holdings — and repurchases inside her ISA. The gain is fully covered by her annual exempt amount, so there is no tax to pay and nothing to report.

She repeats this each tax year. Over three years she moves the bulk of the holding into the ISA without ever paying capital gains tax, and every future dividend and gain on the transferred portion is outside tax permanently.

Had she instead sold the entire £30,000 holding in one go, £5,000 of the gain would have exceeded the allowance, producing a bill at 18% or 24% depending on her income. Spreading it is the whole point.

What it costs

Bed and ISA is not free, and the costs are worth weighing on smaller holdings:

• Dealing charges. Two trades, though many platforms charge only for the repurchase or run Bed and ISA at a reduced rate.
• Stamp duty reserve tax of 0.5% on repurchasing individual UK shares. Funds and investment trusts are generally not affected in the same way.
• The bid-offer spread on the round trip.
• Time out of the market. Usually minutes, but a gap exists and prices can move.

For a holding of a few hundred pounds those costs may outweigh the benefit. For anything substantial, the permanent tax shelter comfortably justifies them.

When to use it, and when not to

Use it when you hold investments outside an ISA and have unused annual exempt amount; when you have ISA allowance available; when a holding pays meaningful dividends that are eating into your £500 dividend allowance; or when you are gradually moving a legacy portfolio into a wrapper.

Do not bother when the holding is tiny relative to the dealing costs; when you have already used your ISA allowance for the year; when realising the gain would take you over the annual exempt amount and create a bill you did not intend; or when the asset is already inside a wrapper.

One case deserves a mention of its own. If a holding is at a loss, selling it still has value — a realised capital loss can be set against gains in the same year or carried forward indefinitely, but only if you report it. Losses are not automatic; they must be claimed, generally within four years.

The dividend angle

Capital gains are only half the reason to do this. The dividend allowance is now £500, and dividends above it are taxed at 10.75% for basic-rate taxpayers, 35.75% for higher-rate and 39.35% for additional-rate.

A £30,000 holding yielding 3% produces £900 of dividends — £400 of which is taxable. For a higher-rate taxpayer that is around £143 a year, every year, on a holding that is doing nothing wrong. Moving it into an ISA removes that permanently, and over a decade the saved dividend tax alone can exceed the dealing costs many times over.

Our guide to dividend tax rates covers how the allowance interacts with your income, and the Dividend Tax Calculator will price it for your own holdings.

Bed and Spouse, and Bed and SIPP

Two variations use the same principle and are worth knowing about, because sometimes they fit better.

Bed and Spouse means selling a holding and having your husband, wife or civil partner repurchase it in their own account. The 30-day rule does not apply because the buyer is a different person. This is useful when your ISA allowance is already used, or when you want to shift future income to a lower-rate taxpayer — the holding ends up in their name, with their allowances and their tax rates applying to it thereafter.

The obvious caveat is that it is genuinely their asset afterwards. This is a real transfer of ownership, not a paper exercise, and it should only be done where you are entirely comfortable with that.

Bed and SIPP means selling and contributing the proceeds to a pension. The gain is realised against your annual exempt amount as usual, and the contribution attracts tax relief at your marginal rate on top — which for a higher-rate taxpayer makes it the most tax-efficient of the three. The trade-off is access: the money is locked until pension age. Our guide to pension versus ISA covers when that trade is worth making.

A note on record-keeping

Whichever route you take, keep the contract notes. You will need the original purchase cost to calculate the gain, and for a holding built up over years through regular investing that means applying the share pooling rules rather than picking a single purchase price.

Pooling matters more than people expect. Shares of the same class in the same company are treated as a single pooled asset with an averaged cost, so you cannot choose to sell the most expensive tranche to minimise the gain. Most platforms calculate this for you, but if you have moved between providers the historic cost data often does not follow, and reconstructing it years later is genuinely difficult.

Timing and the 5 April deadline

Both allowances reset on 6 April and neither can be carried forward. Unused capital gains allowance and unused ISA allowance simply vanish.

That makes February and March the natural window, but leaving it to the last week is a mistake. Platforms get busy, Bed and ISA instructions can take several working days to process, and a trade that settles on 6 April falls into the wrong tax year entirely. Most providers publish a cut-off date in mid to late March — work to that, not to 5 April.

If you are doing this across several holdings, spread the instructions over a few weeks rather than submitting everything at once. It reduces the risk of one delayed trade pushing a gain into a year you did not plan for.

Check where your gain would land first with the Capital Gains Tax Calculator, and see our guide to the CGT allowance for how the reduced exempt amount changes the arithmetic.

A note on how to use this

This guide explains the rules as they stand for the 2026/27 tax year and is written to help you understand your own position. It is general information, not personal financial advice — your circumstances change the answer, sometimes completely. For a decision that matters, speak to a regulated adviser or check directly with HMRC. Our calculation methodology sets out where every figure on this site comes from.

Where these figures come from

Every rate and threshold on this page is checked against HMRC's published guidance for the 2026/27 tax year. If you spot a figure that looks out of date, please tell us.

• GOV.UK guidance for this topic