Bed and ISA transactions have surged by 387% since Chancellor Jeremy Hunt’s announcement of a tax raid in November, according to data from investment platform AJ Bell.
The surge in transactions is being attributed to the incoming changes to Capital Gains Tax (CGT) allowance and the dividend allowance, as investors aim to protect their investments.
The tax-free CGT allowance is set to be cut from £12,300 to £6,000, while the tax-free dividend allowance will be reduced from £2,000 to £1,000 from 6 April. Investors have just two weeks to utilise their CGT allowance before the end of the tax year.
The Bed and ISA transactions allow investors to utilise their CGT allowance while shielding their assets from tax on growth and dividends in the future.
Laura Suter, Head of Personal Finance at AJ Bell, stated: “The prospect of even higher tax bills from next month has prompted investors to stash their cash in ISA accounts ahead of the tax year end. The Chancellor announced his wealth tax raid in November last year and since then investors have cranked into action, moving their investments into an ISA to protect them from capital gains and dividend taxes.
“The fact that the Chancellor is cutting the tax-free allowances for both capital gains tax and dividend tax, at the same time as freezing tax bands, means that investors will be clobbered from two sides. They’ll pay more tax on their existing gains and investment income, but more investors will also be pushed into a higher tax bracket and so face a higher rate of tax on those investments.”
Investors have just two weeks to utilise their CGT allowance before the end of the tax year. The Bed and ISA transactions make the process of transferring investments into an ISA easy, with investors just needing to specify which investments they want to transfer.
However, these transactions take time and the deadline for doing them is always ahead of the tax-year-end deadline, which itself is only two weeks away. Despite already seeing a huge surge in Bed and ISA transactions, AJ Bell expects to see a last-minute dash to ISAs in the next week.