Busiest summer for Bed & ISA transactions
interactive investor reports figures amid growing speculation of capital gains tax rise in October Budget.
2nd September 2024 15:06
by Myron Jobson from interactive investor
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- Bed and ISA transactions increased by 27% between 1 June and 31 August 2024 compared to the same period in 2023
- Transactions up 99% compared to summer 2022.
interactive investor, the UK’s second-largest DIY investment platform, recorded its busiest summer ever for Bed & ISA transactions amid rampant speculation of a rise in capital gains tax (CGT) in the 30 October Budget.
- Invest with ii: What is Bed & ISA? | ISA Investment Ideas | Transfer a Stocks & Shares ISA
Bed & ISA transactions rose by 27% between 1 June and 31 August 2024 compared to the same three-month period in 2023, and were up 99% compared to summer 2022.
The CGT regime has become less generous in recent years. The CGT allowance was cut from £12,300 to £6,000 at the start of the 2023-24 tax year and was then halved to £3,000 in April 2024.
It is a similar story when it comes to the dividends allowance: cut from £2,000 to £1,000 in April 2023, and then reduced further to £500 in April 2024.
Bed & ISA involves transferring assets held outside a tax wrapper into an ISA, so that future investment growth and income are sheltered from tax. It can also be a useful way to take advantage of any unused ISA allowance, especially if an investor has less “new” money to invest.
Customers will pay a trading fee on the repurchase, not the sale. They will also pay stamp duty and market spread costs. CGT is payable on any profits above a person’s annual allowance, but moving the investments to an ISA means you won't pay CGT on those profits in the future.
Myron Jobson, Senior Personal Finance Analyst at interactive investor, says: “The Budget, set to take place on the eve of Halloween, is shaping up to be a nightmare before Christmas for personal finances, with both the prime minister and the chancellor making it patently clear that tough decisions will be made.
“CGT is seemingly in the government’s sights, with a £22 billion black hole in public finances to fill. The government could align CGT rates with income tax, as recommended by the Office of Tax Simplification in 2020, or opt for another change to the CGT regime.
“The threat of a less-generous CGT regime has provided the impetus for many of our customers to shift their existing investments into their stocks and shares ISA via Bed & ISA, shielding their future gains and dividends from the clutches of the taxman. The transfer, however, will involve selling and buying back shares, which could trigger a CGT bill.
“Regardless of what is announced in the Budget, shifting existing investments into a tax-efficient wrapper such as an ISA or a SIPP can pay dividends - which, over the long term, is likely to outweigh any charges that might apply.”
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