Protect savings via ‘Bed and Isa’

INVESTORS who want to protect an existing portfolio from tax may be able to do so using a process known as Bed and Isa. But experts warn they will need to get their skates on.

Doing a Bed and Isa transfer now before the new tax year could save some investors with sizeable portfolios hundreds of pounds.

The esoterically-named Bed and Isa process involves transferring investments held outside a tax wrapper into an Isa. That means that any future investment growth is sheltered from tax.

Most investment platforms will carry this out on your behalf so you don’t have to sell all of your holdings yourself one by one and then buy them all again.

Bed and Isa transfers have soared in popularity in recent months, ever since cuts to the Capital Gains Tax (CGT) and dividend tax allowances were announced by Chancellor Jeremy Hunt in the Autumn Statement last November.

The CGT allowance will be slashed from £12,600 to £6,000 from April 6, and then again to £3,000 in April 2024. The dividend tax allowance falls from £2,000 to £1,000 and then to £500 in April 2024.

If you move your portfolio through a Bed and Isa transfer, you may have to pay tax on any gains. But, once safely in your Isa, any future profits are tax free. By transferring before the new tax year, you will benefit from the higher allowances. Bed and Isa transfers contribute towards your Isa allowance.

Jason Hollands, managing director of investment platform Bestinvest, says: ‘Do not leave it too late. The process takes a few days as the sale of your existing investments will take time to clear before the cash is available.’