Hargreaves Lansdown new service helps investors into Isa tax shelter

Economy
By Liam

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Hargreaves Lansdown launches new service to help savers move investments quickly into the ‘tax shelter’ of an Isa or Sipp

By Angharad Carrick Because this is money

published: | Updated:

Hargreaves Lansdown has launched a new stock exchange service to help savers move their investments to an Isa or Sipp tax shelter.

Shares held outside an Isa or Sipp are subject to dividend tax on income and capital gains tax on profits.

But if they are kept in an Isa for stocks and shares, they are protected from tax and you don’t have to declare them on your tax return.

In the event of an imminent recession, tax-free allowances for both capital gains and dividends will be reduced from the new tax year.

Hargreaves Lansdown has launched a new service to help savers move unwrapped shares into an Isa or Sipp ‘tax shelter’

To avoid this, if you have not used up your Isa or Sipp credit, you can sell some of your dividend-producing shares or funds and then buy them back within an Isa or Sipp before the end of the tax year.

Similarly, large capital gains can also be crystallized to take advantage of this year’s fee before the discount.

This is known as a ‘Bed and Isa’ or ‘Bed and Sipp’ transaction and all future dividends and capital gains are tax free.

Hargreaves Lansdown says the new service will make it faster and easier to move stocks to an Isa or Sipp.

There is no charge for selling shares in the general investment account, but buying back shares in the Isa or Sipp is charged at £11.95. You can see how this compares in our best stocks and stocks Isas and investment platform guide.

Married couples can also transfer shares between themselves without being subject to capital gains tax. Together they can generate a profit of £24,600 using this tax year’s CGT-free allowance.

This is usually a fairly lengthy process as it involves selling an investment, clearing the money and making another investment.

Savers can sell shares in their general investment account and move the money 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 foreign stocks, ETFs and investment funds.

Previously, this service was completely manual, but now the two-step Share Exchange service is performed online.

How will this work?

If you are considering transferring some of your unwrapped shares or funds to your Isa and Sipp, make sure it falls within the current Isa and CGT surcharges.

An example of how Hargreaves’ new platform will help savers:

Susannah acquired 5,000 SPC plc shares for £5.60, now £8.40, a gain of £2.80 per share. This means that Susannah can exchange 2,380 of these shares into her ISA, which will use £6,664 of her £12,300 CGT grant and £19,992 of her ISA grant.

Susannah can also transfer 2,380 shares to her husband Alex, who can also use share swaps, using £6,664 from his £12,300 CGT grant and £19,992 from his ISA grant.

As a result, 4,760 of the 5,000 shares placed in their ISAs are free from future UK income and capital gains taxes.

Tom Lee, Head of Trading Proposition, Hargreaves Lansdown: ‘Given the reduction in capital gains tax and dividend deductions in April this year, the benefits of Share Exchange in protecting your investments from tax are even greater.

“HL’s new online service makes this quick and easy and is available for more than 11,000 listed securities, and for many transactions cheaper, with no bid/ask spread, and for foreign equities, no exchange fees.”

Hargreaves has said execution will be at mid-price, meaning the client will not pay a bid/ask spread.

This saves them an average of 0.1 percent on FTSE 100 shares, 1.2 percent on the FTSE All Share and 6.7 percent on FTSE Aim shares.

The fee for holding shares in a Stocks and Shares Isa or Sipp is 0.45 per cent per annum and is capped at £45 for an Isa and £200 for a Sipp.

Cliff Weight, director of ShareSoc, said: ‘This is an attractive offer, especially when you realize that the account fee for holding shares in their Isa is capped at £45.

“This is another positive move from Hargreaves, on top of their recent voting announcement, which added an additional 1.75 million investors to the existing ranks who can vote for their shares online. Both are positive changes for shareholders’ rights.’

Earlier this week, DIY investors discovered that another platform had also slashed prices, with the introduction of free US stock trading by Bestinvest.

Compare the best DIY investment platforms and stocks Isa

1668695061 424 Investors hammered as dividend and CGT allowances slashed

Online investing is simple, cheap and can be done from your computer, tablet or phone at a time and place that suits you.

When it comes to choosing a DIY investment platform, stock Isa or a general investment account, the range of options seems overwhelming.

Each provider has a slightly different offering, charging more or less fees for trading or holding stocks and giving access to a different range of stocks, funds, and mutual funds.

When weighing up the right one for you, it’s important to look at the service it offers, along with handling fees and transaction fees, plus any other additional fees.

To help you compare investment accounts, we’ve put together the facts and put together a comprehensive guide to choosing the best and cheapest investment account for you.

We highlight the key players in the table below, but we encourage you to do your own research and consider the points in our full guide linked here.

>> This is Money’s full guide to the best investment platforms and ISAs

The platforms below have been independently selected by This is Money’s specialist journalists. If you open an account through links marked with an asterisk, This is Money earns an affiliate commission. We will not allow this to affect our editorial independence.

DIY INVESTMENT PLATFORMS AND STOCKS & STOCKS ISAS
Management feesLoads notesFund tradingDefault share, trust, ETF tradingInvest regularlyDividend reinvestment
AJ call* 0.25%Max £3.50 per month for stocks, trusts, ETFs.£1.50£9.95£1.50€ 1.50 eachMore detail
Bestinvest*0.40% (0.2% for pre-built portfolios)Account fees reduced to 0.2% for turnkey investmentsFree£4.95Free for fundsFree for income fundsMore detail
Charles Stanley directly0.35%No share platform fees on any transaction in that month and an annual cap of £240Free£11.50n/an/aMore detail
Fidelity*0.35% on funds£45 fee up to £7,500. Max £45 per annum for stocks, trusts, ETFsFree£10Free funds £1.50 shares, relies on ETFs£1.50More detail
Hargreaves Lansdown*0.45%Capped at £45 for stocks, trusts, ETFsFree£11.95£1.501% (£1 min, £10 max)More detail
Interactive investor* £9.99 per month, or £4.99 under £30,000, £12.99 for Sipp£5.99 a month back in free trade credit (does not apply to a £4.99 subscription)£5.99£5.99Free£0.99More detail
iWeb£100 one-off£5£5n/a2%, up to £5More detail
Etoro* Free but no Isa or SippInvestment account offers stocks and ETFs. Beware of high risk CFDs on a trading accountNot availableFreen/an/aMore detail
Free trade*Free for Basic account, £4.99 per month for Standard with IsaFreetrade Plus with more investment and Sipp is £9.99/month inc. Is a feeNo fundsFreen/an/aMore detail
Forefront 0.15% Only Vanguard FundsFreeFree Vanguard ETFs onlyFreen/aMore detail
(Source: ThisisMoney.co.uk Jan 2023. Administration fees may be levied monthly or quarterly

Some links in this article may be affiliate links. If you click on it, we may earn a small commission. That helps us fund This Is Money and use it for free. We do not write articles to promote products. We do not allow any commercial relationship to compromise our editorial independence.

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