‘Bed and ISA’ transactions increase by 387% since Chancellor’s wealth tax raid announced in November

Chancellor Jeremy Hunt’s wealth tax raid from 6 April has precipitated a near four-fold increase in Bed and ISA transactions since he announced cuts to the CGT and dividend allowances during his Autumn Statement back in November.

Between November 2022 and February 2023, AJ Bell saw a 387% increase in platform Bed and ISA transactions compared with the same period in 2021/22.

A Bed and ISA is the process of an investment being sold in a Dealing Account and then purchased in an ISA, utilising an investors’ CGT allowance and shielding the assets from tax on growth and dividends in the future. These transactions are carried out at the same time to minimise exposure to market movements on the investment, with only one dealing charge being applied*.

*Bed and ISAs can be carried out online via an AJ Bell account. The tax year end deadline for Bed and ISAs is 31 March 2023, at 5pm.

 
 

Laura Suter, head of personal finance at AJ Bell, comments: “The prospect of even higher tax bills from next month has prompted investors to stash their cash in ISA accounts ahead of the tax year end. The Chancellor announced his wealth tax raid in November last year and since then investors have cranked into action, moving their investments into an ISA to protect them from capital gains and dividend taxes. 

“The fact that the Chancellor is cutting the tax-free allowances for both capital gains tax and dividend tax, at the same time as freezing tax bands, means that investors will be clobbered from two sides. They’ll pay more tax on their existing gains and investment income, but more investors will also be pushed into a higher tax bracket and so face a higher rate of tax on those investments. 

“It makes sense for investors with any remaining ISA allowance to transfer as much of their investments as possible into the account. The Bed and ISA transaction makes this process easy, with investors just needing to specify which investments they want to transfer. But the clock is ticking, these transactions take time and so the deadline for doing them is always ahead of the tax-year-end deadline, which itself is only two weeks away. Despite already seeing a huge surge in Bed and ISA transactions, lots of investors leave things down to the wire – meaning we’re expecting to see a last-minute dash to ISAs in the next week.”

 
 

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