Tax and ISAs

Bed and ISA is something of an odd term but it refers to a simple process. If you hold investments outside your ISA and you want to transfer them into one, a Bed and ISA allows you to do so.

As only the first £500 of dividends are tax-free for investments held outside an ISA, Bed and ISA is a useful mechanism. Here’s how it works:

1.       Once your EQi Stocks and Shares ISA is open, call our Customer Experience Centre to tell us which investments you want to move into your ISA

2.       We’ll arrange to sell said investments on the open market

3.       Once sold, we’ll move the proceeds into your Stocks and Shares ISA, and then buy them back within your ISA

This is a cost-effective way to make the best use of your ISA allowance.

You can give us instructions to carry out Bed & ISA by contacting our Customer Experience Centre on 0345 0700 720. Please note that the Bed & ISA process incurs two lots of dealing charges. You also need to be aware of the Stamp Duty Reserve Tax (0.5% on UK Stocks, 1% on Irish stocks and 0.2% on eligible Spanish stocks) on the repurchase within your ISA. For full details on dealing charges, please see our fees.

It is worth bearing in mind that the current annual capital gains allowance is £3,000. If the profit you make from the sale of your shares exceeds the allowance, you will be liable to pay capital gains tax on all profits above £3,000.

The profit is the difference between what you paid for your shares and what they were sold for. Details of the costs you can deduct and how to calculate what you will be expected to pay can be found on the Government’s website. 

HMRC monitor all subscriptions paid into ISAs and you can only invest a maximum of £20,000 each tax year. If you overpay in error, you can report it to HMRC by calling 0300 200 3300.

From 6 April 2024 you are allowed to subscribe to multiple ISAs of the same type every year, within your ISA allowance. However, this new flexibility does not apply to Lifetime ISAs.

All ISA providers report to HMRC each year, so even if you do make a mistake, as accounts are checked for subscription infringements, you will be contacted by them and asked to pay any tax due and your ISA manager will be asked to void your ISA.