Proportion of interactive investor ISA customers utilising Bed & ISA up 60% in two years as cost of living squeeze intensifes.
With a cost-of-living crisis, and after two years of Covid uncertainty, investors need as many tools as they can at their disposal.
More and more interactive investor customers have been using the flexibility of ‘Bed and ISA’ over the ups and downs of the last few years. This allows customers to recycle money from their trading account into their ISA, rather than commit new money.
The proportion of interactive investor ISA customers who have made Bed & ISA instructions increased by 60% in the last tax year (2021/22) compared to the 2019/20 tax year and by 6% year-on-year (2021/22 compared to 2020/21).
Bed & ISA involves transferring assets held outside of an ISA into the wrapper so that future investment growth and income from dividends are sheltered from tax. Not all investment platforms have been offering this feature during the pandemic, but interactive investor has continued to offer this service.
Myron Jobson, Senior Personal Finance Analyst, interactive investor, says: “Finding creative ways to save money can make all the difference amid the biggest fall in the cost of living since the 1950s, with bumper energy and household bills, food inflation and creeping taxes squeezing household budgets.
“While it might not be the most obvious solution, Bed and ISA is a handy tool for investors seeking to take advantage of their annual ISA allowance but don’t have the cash to invest and have investments held outside their ISA that they want to keep.
“Whether constrained by a fall in income during the pandemic, the heightened cost of living pressures or simply to make their investment more tax efficient, our customers have increasingly sought to shift their investments into the ISA wrapper.
“Shifting investments into an ISA protects future dividends and gains from the clutches of the taxman. It also means that you will no longer have to declare them on your self-assessment tax return – so less hassle. For those with unwieldy portfolios, Bed & ISA is also a valuable tool as a part of a broader portfolio spring-clean strategy.
“There might be Capital Gains Tax (CGT) implications, depending on your circumstances as Bed & ISA action is treated as a sale for CGT purposes. This means that gains that exceed the annual CGT allowance of £12,300 is liable to tax.
“While you cannot avoid all commissions on the repurchase of investments into an ISA or stamp duty, if applicable, Bed & ISA is tried and tested route to wrapping existing investments to generate the long-term benefits of a tax-efficient ISA – which over the long term is likely to outweigh the charges that might apply.”
- Under the interactive investor Bed & ISA service, a customer’s chosen investments from their trading account are sold free of charge and then the proceeds are used to immediately repurchase the same holdings within the ISA. interactive investor only charges trading fees on the repurchase.
- If you have unused trading credit in your account, this will be put towards the cost.
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Please remember, investment value can go up or down and you could get back less than you invest. If you’re in any doubt about the suitability of a stocks & shares ISA, you should seek independent financial advice. The tax treatment of this product depends on your individual circumstances and may change in future. If you are uncertain about the tax treatment of the product you should contact HMRC or seek independent tax advice.