Bed-and-ISA explained — using your CGT allowance without losing the position

If you hold investments outside an ISA — in a general investment account (GIA) — and you’re sitting on gains, the £3,000 annual CGT exempt amount is a small but real opportunity. Doing nothing means it expires on 5 April; using it means crystallising up to £3,000 of gains tax-free and refreshing the cost basis on what you hold.

The standard tactic for using it without giving up your investment position is bed-and-ISA. This is what it does, when it’s worth doing, and the rules that constrain it.

What bed-and-ISA does

The mechanic is straightforward:

1. You sell an investment in your GIA — usually one sitting on a gain close to the £3,000 allowance.
2. You transfer the cash to your stocks & shares ISA.
3. You rebuy the same (or a similar) investment inside the ISA wrapper.

The result: your taxable gains for the year include up to £3,000 of crystallised profit (tax-free under the annual exempt amount). The investment continues to exist in your portfolio — but now inside the tax-free wrapper. Future growth and dividends won’t be taxed.

Most stocks & shares ISA platforms offer bed-and-ISA as a single in-platform transaction that handles the sell/transfer/rebuy without you having to do each step manually.

Why the 30-day rule doesn’t catch this

HMRC’s 30-day rule (also called the “bed and breakfasting” rule, after a tactic this rule was introduced to block) says: if you sell an asset and buy the same asset back within 30 days, the disposal is matched against the repurchase rather than your original cost. That neutralises the gain — no tax saved, no allowance used.

Bed-and-ISA gets around this because:

• You sold the asset outside the ISA wrapper.
• You bought it inside a different legal wrapper.

The repurchase doesn’t legally count as the same asset acquisition for matching purposes — and HMRC has explicitly confirmed bed-and-ISA is not caught. The same applies to bed-and-SIPP, where the rebuy happens inside a pension wrapper, and bed-and-spouse, where the asset is bought back in a spouse’s name.

The closest published HMRC reference is the Capital Gains manual (HS284 and the matching share rules in the CG manual).

When it’s worth doing

A few situations where the maths is clearly positive:

• You have unsheltered investments with embedded gains. Without using the allowance each year, gains accumulate and one big sale becomes taxable at 18% or 24%.
• You’re below the £20,000 ISA contribution limit for the year. The cash from the sale uses ISA allowance — you need headroom.
• You expect to hold the position for years more. The tax-free wrapper compounds the benefit.

Where the maths is less clear:

• Small unrealised gains. If you’re only sitting on £200 of gain, the dealing costs (often £10–£30 round-trip on individual shares; cheaper for funds) eat the saving.
• You’re close to selling anyway. If you were going to sell next year and have no use for the ISA wrapper, just sell.
• The investment pays no dividend and you’ll be a basic-rate taxpayer at sale. The 18% CGT on a £3,000 future gain is £540; the saving from sheltering it now needs to be weighed against the cost of doing so.

The mechanics, step by step

1. Confirm your allowance. £3,000 across all disposals in the tax year. If you’ve already realised a gain elsewhere, deduct it.
2. Identify the position to bed-and-ISA. Usually the one closest to a £3,000 gain — easier than splitting across multiple. Some platforms will let you specify a target gain amount.
3. Confirm ISA headroom. The sale proceeds will count toward your £20,000 annual ISA contribution. If you’ve already used £18,000 in cash and stocks ISAs, you can only bed-and-ISA up to £2,000 of cash without exceeding the cap.
4. Use the platform’s bed-and-ISA function if available, or do it manually: sell, transfer cash to ISA, place the rebuy order.
5. Be aware of the time out of market. Even with same-day execution, there’s usually 1–2 settlement days where you’re holding cash. The market can move in that window.
6. Record the disposal for self-assessment if your total gains for the year exceed the allowance or your total proceeds exceed £50,000 in a year.

Bed-and-spouse — the alternative if you’re married

If you’re married or in a civil partnership and your spouse has unused CGT allowance, you can sell an asset and have them buy it back. The transfer between spouses is tax-free (no CGT on inter-spousal transfers); the sale into the open market crystallises your gain.

This is a more aggressive tactic — HMRC accepts it but it’s sometimes scrutinised in practice, especially if the timing looks engineered (e.g. sale on 4 April, spouse buys on 5 April). Many planners suggest at least the 30-day window between disposal and reacquisition by the spouse, just to keep it clean.

The benefit: you effectively double your household’s annual CGT allowance to £6,000 — and over a decade of using it, that compounds into a meaningful tax-free position.

Things that often go wrong

• Overshooting the £3,000 allowance. Easy to do if the position has moved between when you check the gain and when the trade executes. Some platforms let you specify a target gain in £, which helps.
• Using up ISA allowance you needed for something else. If you were planning to fund a £20,000 ISA from a future salary bonus, doing bed-and-ISA earlier in the year may close that door.
• The asset can’t be held inside an ISA. Some investment trusts, AIM shares and obscure ETFs aren’t eligible — confirm before selling.
• Dealing costs eat the saving. Individual shares at £10/trade × 2 (sell + rebuy) is £20. On a small gain, that’s a meaningful percentage.

A reasonable approach

For investors with a few thousand pounds of unsheltered gains and a stocks & shares ISA with room:

1. Check the unsheltered portfolio in February or early March each year.
2. Identify one or two positions sitting on a gain close to (but below) £3,000.
3. Use the platform’s bed-and-ISA function to crystallise the gain and rebuy inside the ISA.
4. Record the disposal if reporting thresholds are crossed.
5. Repeat next year.

Over 5–10 years, this can move a meaningful portion of a portfolio into the tax-free wrapper without ever triggering a tax bill.

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Last updated 22 May 2026. This guide is educational and is not personal financial advice. CGT rules can change between budgets — confirm on the HMRC capital gains pages before acting. See our disclaimer.