Hargreaves Lansdown has launched a new Share Exchange service to help savers move their investments into an Isa or Sipp tax shelter.
Shares held outside of an Isa or Sipp are liable for dividend tax on income and capital gains tax on profits.
But when they’re held within a Stocks and Shares Isa, they’re sheltered from tax and you don’t need to declare them on your tax return.
A looming raid will see the tax-free allowances for both capital gains and dividends slashed from the new tax year.
Hargreaves Lansdown has launched a new service to help savers move unwrapped shares to an Isa or Sipp ‘tax shelter’
To dodge this, if you haven’t used up your Isa or Sipp allowance you can sell some of your dividend generating shares, or funds, and then rebuy them within an Isa or Sipp before the end of the tax year.
Big capital gains can also be crystallised in the same way to take advantage of this year’s allowance before the cut.
This is known as a ‘Bed and Isa’ or ‘Bed and Sipp’ transaction and any future dividends, and capital gains, will be tax-free.
Hargreaves Lansdown says its new service will make it quicker and easier to move shares into an Isa or Sipp.
There will be no charge for selling shares in the general investment account but there will be a charge of £11.95 to buy shares back in the Isa or Sipp. You can see how this compares in our best stocks and shares Isas and investing platforms guide.
Married couples can also transfer shares between each other without triggering capital gains tax. Between them they can generate gains of £24,600 using this tax year’s allowance CGT free.
This is usually a fairly lengthy process because it involves selling an investment, the funds clearing and then making another investment.
Savers can sell shares held in their general investment account and move the cash into either a Stocks and Shares Isa or Sipp, as part of their annual subscription, and buy back the same shares in the Isa or Sipp.
This will be available for all UK and overseas shares, ETFs and investment trusts.
Previously, this service was entirely manual but now the Share Exchange service will be done online in two steps.
Tom Lee, head of trading proposition, Hargreaves Lansdown: ‘Given the cut to the capital gains tax and dividend allowances coming in April this year, the benefits of Share Exchange to shelter your investments from tax are even stronger.
‘HL’s new online service makes this quick and easy and is available on over 11,000 listed securities, and for many transactions cheaper, with no bid/offer spread, and for overseas shares, no foreign exchange charge.’
Hargreaves has said execution will be at the mid-price, meaning the client does not pay any bid/offer spread.
This will save them an average of 0.1 per cent on FTSE 100 shares, 1.2 per cent across the FTSE All Share and 6.7 per cent of FTSE Aim shares.
The fee for holding shares in a Stocks and Shares Isa or Sipp is 0.45 per cent a year and is capped at £45 for an Isa and £200 for a Sipp.
Cliff Weight, director of ShareSoc, said:’This is a compelling offer, particularly when you realise the account fee for holding shares in their Isa is capped at £45.
‘This is another positive step from Hargreaves, coming on top of their recent voting announcement, which added another 1.75m investors to the existing ranks of this who can vote their shares online. Both are positive changes for shareholder rights.’
Earlier this week, DIY investors discovered another platform had also cut prices, with Bestinvest’s introduction of fee-free US share trading.