Can you transfer shares into an ISA?
You cannot transfer normal shares and investments directly into an ISA, but you can sell and repurchase them within your ISA account to get the ISA tax benefits.
HMRC only allows cash contributions into an ISA. This is because they need to track how much you contribute each year so that you don't go over your limit of £20,000.
If you transferred non-ISA stocks and shares straight in, things would get confusing as their price fluctuates so frequently, and there may be exchange rates and bid-offer spreads to account for too.
How do I transfer shares into an ISA?
The best way to get your non-ISA shares and investments into an ISA is to sell them, add the proceeds to your ISA, and repurchase them inside your ISA.
Once your investments are in a Stocks and Shares ISA they are completely immune from taxes. But first, you need to know how to put shares into an ISA.
The best way to do this is via a Bed and ISA.
What is a Bed & ISA?
A Bed and ISA is the process of selling your existing shares and investments and instantly buying them back within a Stocks and Shares ISA wrapper, making them immune from taxes going forward.
Your ISA provider carries out a Bed and ISA for you so that they can complete both trades almost instantly and reduce any market movements in between the deals. This means you’re less likely to miss out on any share growth during the process.
You can Bed & ISA as many shares or funds as you want, but each one will use up a portion of your annual ISA allowance so you can’t go over £20,000 in the current tax year.
How does a Bed and ISA work?
Let’s say you own 5,000 BP shares that you want protecting in a Stocks and Shares ISA account.
1. You first need to make sure you hold these BP shares with your Stocks and Share ISA provider so they can sell them for you.
If you hold physical share certificates, you’ll first need to transfer or lodge these with your ISA provider to get electronic versions. Speak to your ISA provider to get the relevant paperwork to do this and find out the charges.
If you hold your shares or investments in a trading or general investment account with someone else, then you’ll need to transfer them to your ISA provider’s general investment account. You can do this with a form in the post, and remember to check the transfer charges with your old provider.
2. Next, submit your Bed & ISA instruction via your mobile app, online account, or by phone or post.
Your BP shares will be sold, the proceeds contributed to your ISA, and then instantly bought back (within seconds) inside your Stocks and Shares ISA account.
Capital Gains Tax (CGT): Remember, when your shares sell at this point you are liable for capital gains tax on the proceeds. Even though they are going into an ISA, there is no way to avoid this CGT tax charge if your sales warrant it. Only after they are ISA wrapped are your sales free from capital gains tax.
You will probably have a few less shares than you started with due to dealing fees and the bid-offer spread (the small difference between a share’s sale and purchase price).
Your ISA top up amount is the amount that goes into your ISA to purchase your new shares with. Your ISA provider will confirm this figure, and it is deducted from your remaining 2021/22 ISA allowance.
3. From this point, your BP shares are completely free from dividend tax and capital gains tax.
Can I transfer shares worth more than £20,000?
If your existing shares are worth more than £20,000, you can Bed and ISA up to £20,000 worth in one tax year, but not more.
You don’t need to sell 100% of your holding to do this, only £20,000 worth, so you won’t need to pay off your full CGT liability at once if you have one.
You can then spread your CGT tax liability over multiple tax years, doing a Bed and ISA each year.
What types of shares can I transfer into an ISA?
The above process works for any shares or other investments that you can hold in an ISA, including:
- Share certificates
- Funds and other investment products
- Trading accounts
Note: you cannot hold private company shares in an ISA – only those that are publicly traded.
What are the benefits of transferring shares into an ISA?
Once you have moved your shares into an ISA account, you won’t need to pay income, dividend or capital gains tax at all on your investments.
Does it cost money to move shares into an ISA?
Most likely, yes, but not always. You could be charged for transferring your investments to your ISA provider and also charged on both the sale and repurchase.
How many shares can I transfer into an ISA?
You can have as many shares as you like in a Stocks and Shares ISA provided you don’t contribute over your annual ISA allowance which is £20,000 for the current tax year.
You can hold shares in as many different companies as you like.
Will I pay capital gains tax moving shares into an ISA?
Yes, you cannot transfer your shares into an ISA without paying any CGT liable on the value of your sale.
This is because up to £20,000 worth of your shares are sold and then repurchased, triggering your GCT liability on the sale value.
How long does it take to transfer shares into an ISA?
If your shares are already held electronically with your ISA provider then a Bed and ISA will complete in the same day.
However, if you need to transfer your stocks to your new provider first, it can take several weeks to complete.