Bed & ISA - what?

[darasda]

Could someone explain the concept of Bed & ISA to me like I'm a 12 year old?

My understanding is I sell some holdings within a GIA and transfer directly to an ISA thereby avoiding CGT?

That must be wrong surely!!

TIA

You’re not necessarily “avoiding” CGT with this method. In the vast majority of cases, you technically need to “cash out” the money from your GIA to then re-invest in your ISA.

But the theory is that because you’re “only” funnelling £20K across per tax year it is unlikely that you’ll trigger the £12.5K threshold above which you have to pay CGT.

Thanks for that,

Is it a common thing to do? Or do most people pay into their ISAs with a lump sum or drip feed out of their post tax net income?

Year 1 you would pay into an ISA, but if you invest more than £20k a year you would then pay the GIA. Year 2 you Bed and ISA from the GIA and only put new money in the GIA.

This starts to use your CGT allowance as you sell and transfer