Can I transfer shares into an ISA without paying capital gains tax?

12 March 2021

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Question by Christine

Good afternoon. I have a question about shares. If you wish to transfer shares into an ISA is it possible to do this without paying capital gains tax as I understand you would have to sell them first? Thanks for your help


Answered by Josh Butten

Hey Christine!

Generally speaking you need to invest cash into an ISA, rather than transfer shares directly. (There is an exception to this rule if you have acquired the shares through an all-employee savings-related share option scheme (such as a SAYE scheme), an all-employee approved profit-sharing scheme or Share Incentive Plan). Assuming your shares do not fit those criteria, this is a disposal for Capital Gains Tax purposes.

You have an ‘allowance’ known as the 'Annual Exempt Amount’ of £12,300, so the first thing to check is whether the embedded capital gain within your £20,000 share sale is going to be within this figure? If yes - and you haven’t used your CGT Annual Exempt Amount elsewhere this tax year - no CGT will be due.

If you’re married or in a civil partnership, it’s also worth highlighting that shares can be transferred to your partner with no CGT implications of the transfer. They can then sell the shares and use their Annual Exempt Amount, with the gains assessed against when you originally purchase the shares.

If you’ve exhausted these options, then any surplus gain will be taxed at either 10% (if the gain, plus your income for the tax year is less than £50,000) or 20% on any gains which exceed that amount. Depending on your wider circumstances, it may be worth considering deferring some of the share sales to next tax year, as using next years Annual Exempt Amount may be preferable to losing this years ISA Allowance if you can save 20% tax on the disposal.

Hope this is helpful and that you can take some positive steps before tax-year-end!

Answered by

Josh Butten

Co-founder

Josh is a co-founder at boosst, an independent financial planning firm that works with families across the UK - and currently the CISIs Financial Planning Firm of the Year. Josh specialises in helping families to answer their ‘big questions’; which is achieved by bringing together personal finance expertise with cashflow planning software.