What is Bed & ISA

Understand what Bed and ISA is and how it works

What’s a bed and ISA?

Despite the name, a bed and ISA doesn’t have anything to with opening an ISA as you sleep.

It refers to a pair of transactions that investors use to move their portfolio into a stocks and shares ISA - that’s an ‘individual savings account’ for anyone unfamiliar with the acronym.

In one transaction, an investor will sell some stocks in a regular brokerage account. At exactly the same time, they’ll try to buy the same stocks back in a stocks and shares ISA.

What’s the point?

Even though it’s probably fun trying to buy and sell stocks simultaneously, people don’t make bed and ISA transactions just for kicks. The reason they do it is because of the rules governing ISAs.

You can’t transfer stocks that you already hold in a regular brokerage account into an ISA. To get the tax benefits that come with an ISA, you have to deposit money into one and then invest it.

That means anyone who holds stocks and shares in a regular brokerage account will have to carry out bed and ISA transactions if they want to move them into an ISA.

Check our stocks and shares ISA page to see how you can open an ISA with Freetrade.

What does it cost?

Even if you managed to buy and sell your stocks at exactly the same time, performing a bed and ISA transaction will cost you some money. There are a few reasons for this.

First of all, buy and sell prices are different. A company that buys stocks from you will only sell them back to you at a higher price. That’s how they make money.

The next cost is stamp duty. You won’t pay this when you sell stocks but you do have to pay the 0.5 per cent tax as a buyer.

If you use a broker that charges you trading fees or any other commissions, you’ll also have to pay those too.

Further resources on ISAs and investing

Beginner's guide on stocks and shares ISA
Guide to ISA transfers
How to become an ISA Millionaire
Is Crypto a good choice for your ISA
Guide to how to invest in stocks

More terms

Withholding Tax
Read More
Time-Weighted Rate of Return (TWRR)
Read More
Time Value of Money
Read More
Account balance
Read More
Earnings per share
Read More
Accounting standards
Read More
Interest Rate
Read More
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Everything in Standard and:
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  • Priority customer service
  • 5% AER on up to £3,000 uninvested cash
Basic
£0.00
/Month
Accounts
  • General Investment Account
Benefits
  • A great way to try Freetrade before transferring your ISA or pension
  • Unlimited commission-free trades. Other charges may apply.
  • Trade USD and EUR stocks at the exchange rate + 0.99% FX fee
  • Access to a selection of Freetrade’s 6,200+ global stocks and ETFs
  • 1% AER on up to £1,000 uninvested cash
  • Fractional US shares
  • Access to mobile app and web platform
Standard
£5.99
/Month
billed monthly
Accounts
  • General Investment Account
  • Stocks and shares ISA
Everything in Basic and:
  • Access to 6,200+ stocks and ETFs
  • A lower FX fee of 0.59% on non-GBP trades
  • 3% AER on up to £2,000 uninvested cash
  • Automated order types, including recurring orders
  • More stats and analysis, including analyst ratings and EPS estimates 
Plus
£11.99
/Month
billed monthly
Accounts
  • General Investment Account
  • Stocks and shares ISA
  • Personal pension
Everything in Standard and:
  • A lower FX fee of 0.39% on non-GBP trades
  • Priority customer service
  • 5% AER on up to £3,000 uninvested cash

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