The number of clients taking advantage of share exchange has soared this tax year, against a backdrop of higher capital gains tax rates and low allowances, says Hargreaves Lansdown.
The investment platform reported a 59% jump in clients using share exchange, otherwise known as ‘Bed & ISA’, compared to the previous tax year.
The hike in the capital gains tax rate on stocks and shares from 10% to 18% for basic rate taxpayers and 20% to 24% for higher and additional rate taxpayers makes it even more rewarding, the firm said.
Sarah Coles, head of personal finance at Hargreaves Lansdown, said: “The Autumn Budget hiked the capital gains tax rate. This came hot on the heels of the previous government taking the scythe to allowances for both capital gains tax and dividend tax. All this has made protecting your investments from unnecessary tax even more vital.
“If you have investments outside tax wrappers and available allowance this year, it’s a no-brainer to move some of them to a more tax efficient environment.”
Bed & ISA is a simple, two-step process which involves selling shares to realise gains before buying those back. The money is reinvested in the same assets within an ISA immediately, protecting it from dividend and capital gains tax in the future.
The same process can be done with a SIPP, allowing pension savers to sell existing shares, move the cash into their pension and re-purchase the shareholding.
The deadline for Bed & ISA is 4th April, while the SIPP deadline is 2nd April.
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