Using market dips to shelter your existing investments from tax

On 9 March, the UK market was down 22% from its 2020 peak.

We don’t think long-term investors should panic. Experience has proven that sitting tight in difficult times can let your portfolio take full advantage of a recovery. But it doesn’t mean you should do nothing at all.

In fact, market drops can provide an opportunity to pay less tax. If you act soon, you could open or top up a Stocks and Shares ISA with investments you already own.

Getting them into an ISA could cut your potential future tax bills. Once in an ISA, they're sheltered from any further UK income and capital gains tax, but also from any future tax rises. And when markets drop, you can get more of your investments into your ISA.

This article isn’t personal advice. Tax rules can change and the benefits depend on your personal circumstances. If you’re not sure about whether an investment or an ISA is right for you, please seek advice.

How it works

You’re not usually allowed to move existing investments directly into an ISA. But you can sell them, use the money raised to open or top up your ISA, and then buy them back.

Done as a single instruction this process is called a Bed and ISA, and with us, it’s very easy to do.

All you need to do is tell us which investments to sell. Then, whether you’d like to buy them back, something else or hold as cash. We'll do the rest for you.

We’ll sell your investments in the order you want, until we reach your ISA allowance or the amount you’ve requested. If your investments are worth more than this, we'll only sell part of your holding. The rest will stay in your Fund and Share Account.

How much does a Bed and ISA cost?

We don’t charge you to Bed and ISA funds. The charges are also the same to hold funds in an HL Stocks and Shares ISA as they are in the Fund and Share Account. So the tax benefits of an ISA don’t cost any more for funds.

We'll sell your funds and buy them back at the next available valuation point. This is often the next working day. But that means the price could change and you'll end up with a different number of units once the investments have been bought back. While most don't, you should also check if the fund you’re buying charges an initial charge.

For shares, there’s no charge to sell. You’ll pay up to £11.95 for each share holding bought back online (or 1%, min £20, max £50 per deal by post). Unlike the Fund and Share account, there’ll be an annual management charge for holding shares within the ISA (0.45% per annum capped at £45 for shares) – you might also have to pay stamp duty.

Find out more about our charges

As with funds, there’ll be a difference in the price at which you sell and buy back your shares. This means you could end up with a different number of shares than held before.

When you sell investments held outside an ISA, any profit will count towards your capital gains tax allowance (£12,000 in 2019/20). You may have to pay tax on any gains above this. All investments can fall as well as rise in value so you could make a loss.

How to do a Bed and ISA?

The cheapest, easiest and quickest way of doing a Bed and ISA is online. The process only takes a few minutes. Or, if you prefer, you can do it by post by downloading a form.

If you get your application to us by 1 April, we’ll make sure it’s done in this tax year.

Find out more about a Bed and ISA