The Chancellor confirmed in this year’s Budget Report that the overall ISA limit will be raised from the current £15,240 to £20,000 from 6 April 2017.
Most employees know that they can invest in an ISA, but fewer realise that they can put shares and investments they already own into an ISA wrapper to protect them from tax. Jonathan Watts-Lay, Director, WEALTH at work, a leading provider of financial education in the workplace, supported by guidance and advice, comments:
“Employees who haven’t maximised their ISA allowance, and have shares or other investments, might want to consider using them to fund their ISA. HMRC rules do not allow you to transfer them directly into an ISA, so first they must be sold, the cash placed in the ISA and then the shares can be repurchased – this is known as ‘Bed and ISA’ transaction. The shares will then in future be sheltered from tax in the ISA. It should be noted that the sale may give rise to a capital gain and tax may be payable if the gain is more than the annual Capital Gains Tax (CGT) exemption – £11,100 for 2016/17.”
He continues, “If the shares have come from a SAYE scheme and are within 90 days of exercise of the option, shares can be transferred ‘in specie’ to an ISA i.e. without the need to first sell them. In specie transfers into an ISA from a SAYE scheme are free from CGT. Many high street ISA providers can’t facilitate an in specie transfer so employees would need to use a workplace ISA, or a specialist provider.”