LON:ABDP | Bed And Breakfast Time! - End Of Tax Year Portfolio Actions...

13th Mar '21 by InvestorJohn

13 comments 1249 reads

No, I’m not talking about staying away from home for the weekend – haven’t you heard that we are still in lockdown?

The Bed and Breakfasting that I am talking about is the act of selling a share and buying it back again to realise a gain or a loss.

Why would you want to do that I hear you ask – surely that is a waste of time or an expensive hobby!

There are a few reasons why this could be a good idea for you…

Selling a share will realise the capital gain or loss in the current tax year. This will mean you can use your annual capital gains allowance for the year or offset the capital loss against other gains from another asset.

You only have to pay Capital Gains Tax on your overall gains above your tax-free allowance (called the Annual Exempt Amount). The Capital Gains tax-free allowance is: £12,300.
www.gov.uk

You may want to move the share into a more Tax efficient wrapper before the new tax year. For example I just sold ABDP today to move it from a company trading account into my ISA. This way I won’t let gains build up to hit me in 1 year and of course the more the gains compound the bigger the bill can be!

Now of course HMRC have to spoil all the fun and there are rules…

So if you want to buy back the same shares, then you have to wait for more than 30 days from the date of sale before you buy them back. If you buy them back before that you may as well have just kept them. (unless you buy them back cheaper of course).

If a disposal of shares is identified with shares acquired within the following 30 days, the gain or loss on disposal is the difference between the net disposal proceeds and the acquisition cost.
www.gov.uk

Of course you can buy them within a different account type like an ISA, SIPP or SSAS straight away like I did as mentioned above. This means that you will not be out of the market and missing out on any gains.

This is just some food for thought – of course do your own research but now is the time to top up your ISA or Pension before the tax year is over (5th April 2021)…

Unlock with Email

Unlock with Google

Already have an account?
Login here

Momoko Miyamoto

13th Mar '21

Bed & Spouse. Sell, book a gain then buy in spouse's account. Or transfer out to spouse then sell to book a gain if already maxed out annual CGT allowance and or paying higher rate income tax. also bare trusts for kids to make use of their CGT / income tax allowances if maxed out their SIPPs & JISA

Rusty2

Some brokers do this for you, ie selling in your share account and buying back into your ISA or SIPP. I did once with HL and would not do it again, it took them several days and the prices moved a fair amount, so you don't know exactly what the profits will be. They reduced their fees, however I would have been better off selling and buying back myself as you have done. Now I have very little outside my ISA/SIPPs, I moved most of mine some years ago to avoid dividend tax.

It is a good idea to use up your capital gains allowance and move into an ISA, as long as you have enough funds left in your ISA or to buy other shares. I'm currently trying to move from one platform to another, why is it so difficult to even move cash between ISAs?

InvestorJohn

The providers are trying to keep track of your allowance and make sure you don't over subscribe I suppose...

Maybe but it took many days as so many people did it at year end. As you won’t know the prices it can a bit tricky re capital gains and ISA allowance. Even though the fees are lower I would not do the broker Bed and Breakfast scheme again. Also you will have to pay stamp duty again unless it’s an AIM share.

Charlie

When I asked Hargreaves last month to move my stocks from my fund account to my Isa they advised me it cant be done, by the sounds of the experience you had they no longer offer that service. I assumed it might have been a HMRC issue or because they make money on fees opening and closing.

Am I right in saying that you have a CGT allowance 12,300 with up to £2000 dividend plus a personal tax allowance of 12,500 outside the ISa?

Also can losses be deducted from stocks if sold at a loss together with stockopedia / advfn fees?

You are allowed up to £2000 Dividends per person that is correct

The 12500 personal tax allowance is more for Income Tax so can't be used for Capital Gains

i.e. Unused personal allowances for Income Tax cannot be used against Capital Gains liability.

The Bed and Breakfast with HL can only e done close to the end of the tax year. Can’t remember the exact dates. Maybe they have stopped that service now.

HL can’t even move cash from share ISA to their cash ISA.

Looks like HL are not doing this at the moment due to Covid:

“You can use investments from your Fund and Share Account to open or top up an ISA or SIPP. This is sometimes called a Bed and ISA or Bed and SIPP.

Due to our COVID-19 service changes, we are not currently able to do this for you. Instead you can sell investments in your Fund and Share account online, and move the money to your ISA or SIPP. You can then reinvest the cash.”

doug2500

Losses can be used but not fees except direct costs e.g. commission and stamp on that trade.

mckennajewels

19th Mar '21

HL are not doing a lot of things now and blaming it on Covid. A combination of the Woodford scandal and Covid has left HL as diminished as the Hl share price!

gus 1065

Have to say, listening to some of the beef about HL, I have been very impressed with the quality of service I get from Charles Stanley (LON:CAY) Direct. Not the cheapest online broker (£11.50 per trade) but they often execute inside the market spread and I’ve found the Help Desk (both online and by telephone) to be very ...... helpful. They have done a couple of Bed & ISA trades for me, picked up several acquisitions sourced through Primary Bid, are always timely and efficient on Open Offers and other Corporate Actions and provide an excellent (free) CGT Report on demand* that deals with applicable costs, pooling, gains etc., and is in a format that HMRC seem happy to accept.

On the specific subject of Bed & ISA’s, here’s what they have to say on the matter as per the website.

“HMRC does not permit the direct transfer of investments from outside of a tax-wrapped account into an ISA.

To move shares from your Investment Account to your ISA, you can instruct a Bed & ISA by calling the Helpdesk on 0131 550 1234. Essentially, we would sell the relevant holdings from your Investment Account and repurchase them in your ISA. This is done simultaneously so that we can reduce the spread. The cost is £11.50 per trade and stamp duty may be applicable on the repurchase. Please also note that because you would have to buy back the shares at a higher price than they are sold, a cost of around £30.00 to £50.00 is built in via the spread.

If you wish to transfer funds to your ISA, you would need to sell the fund from the Investment Account and await settlement, following which you can then transfer and reinvest the cash proceeds within the ISA.”

As I say, not necessarily cheap but if you have one or two large holdings to transfer across the tax break achieved might justify the expense.

Gus.

* By the by, you can request a tax year CGT report at any time for the relevant tax year. I did one in early March which showed the extent of my YTD Capital Gains so that I can arrange a suitable trade to maximise the use of this year’s CGT allowance.

colin1862

25th May '21

Can the exemption from Inheritance tax with AIM shares be passed between spouses if the shares are transferred on the death of one spouse?

The Phoenix

26th May '21

Out of interest re the 30 day rule is it 30 days or 30 working day ie excluding weekends ?

Thanks Andy

Bed and Breakfast time! - End of Tax year portfolio actions...

Unlock the rest of this article with a 14 day trial

About the Author

InvestorJohn

13 comments

Unlock the metrics for all these stocks and more...

Unlock the metrics for all these stocks and more...