1. Bed & ISA -Pradip Jadhav

2. Definition A Bed & ISA by definition is effectively where a parcel of shares in the same Company, held in an individual’s own name, are sold and then simultaneously bought back within an ISA

3. Previously Used A “Bed & Breakfast” was two transactions in your own name, whereby you sold shares at the close of business on one day and then bought them back at the opening of business the next morning. This reduced the investors exposure to market movement. The “Bed & Breakfast” route is no longer available and has been firmly closed by the Chancellor. Any future gains in the ISA would not be subject to any form of tax and nothing within an ISA needs to be declared in. This is where the ISA becomes your tax saving friend on more than one front !! your tax return

4. The real clever part is if the share price recovers as you hoped or anticipated then you now hold the stock in the tax free ISA and you do not need to declare the gains to the taxman. Once the stock is in the ISA it is also free from UK income tax and the account manager can presently reclaim a 10% tax credit on dividends for you. Yes you are getting a tax rebate, rather than a tax bill!

5. Who does it? This exercise is carried out by an Inland Revenue authorised account manager on behalf of the investor The investor, by completing the relevant application form gives the authority to the account manager to sell and repurchase either a set number of shares or an instruction to trade up to the subscription limit (£7000 for a maxi Isa).

6. Max ISA Limit? The sale proceeds on settlement are transferred to the ISA which constitutes a subscription being made by that investor in that tax year. The limit at present for a maxi ISA is £7000 which if you are married gives you the chance to jointly subscribe £14,000 whilst potentially avoiding tax now and in the future as your investments hopefully achieve the levels of growth you have forecast in a tax free environment!!

7. ISA Providers? There are many providers of this service and therefore it is both advisable and prudent to shop around, not just on price, but also on market reputation and equally importantly, on the level of service. There are always special deals on offer, but remember cheapest is not always best when it comes to your future investments. You should not have to pay the normal rates on both the sale and repurchase as there are discounts on one or both transactions offered by the majority of providers.

8. If you pick the right provider it’s easy to do and remember although there is a small price to pay you have to look at the longer term and the bigger picture as the Government have clearly set out their stall and made it clear that we all need to look at saving for ourselves for our own future!!

9. Benefits? No further tax to pay Investments held in an ISA or SIPP are free of capital gains tax and there is no higher-rate tax to pay on any income. Tax Relief If you invest in a SIPP you will also receive tax relief. You could turn £8,000 worth of shares in to £10,000 in your SIPP. Increased future CGT allowance If you sell your shares at a loss outside of an ISA or SIPP, once declared, you can carry forward and offset them against any gains in the future, effectively increasing your future capital gains tax allowance.

10. Don'ts Remember, you may only subscribe to one type of ISA, either maxi or mini, in any one tax year. Do not therefore fall into the trap of opening a second ISA in the same tax year and therefore nullify any future tax savings. The second account would have to be closed and voided under Inland Revenue Regulations, and would almost certainly involve you in additional unwelcome and unnecessary costs.