The truth about investment transfers

Whether investors want to reduce their capital gains bill ahead of upcoming tax cuts, transfer shares to someone else or switch to a provider who gives great value without charging a fortune in fees, Alice Haine's insights can help investors feel more clued up during the investment transfer journey.

Why transfer investments?

There are several reasons why investors might want to transfer investments:

• Consolidate – it can be useful to hold all your investments with a single provider as you can log into your account and see your ISA, SIPP or other investment account portfolios in one place
• Better value – another provider may offer a more varied selection of investments, a better range of Ready-made Portfolios, lower fees or more support on how to invest and what to invest in. Value-added tools or free financial coaching can be very attractive for both a seasoned and novice investor offering extra incentive to move investments from one provider to another
• Tax efficiency – another key reason to transfer investments. If you hold investments such as shares, funds, investment trusts or exchange traded funds inside a taxable investment account, then it might make sense to transfer them into an ISA or SIPP to avoid the impact of upcoming changes to dividend and capital gains allowances
• Save more money – savers can shelter up to £20,000 this tax year in an ISA with any income or capital gains tax-free, allowing them to grow wealth and withdraw investments when they want without fear of a hefty tax bill at the end
• Interspousal transfers – where investments can be switched to a husband, wife or civil partner without triggering a tax charge
  • Interspousal transfers allow two sets of allowances to be used, such as dividend and capital gains tax allowance, to reduce the family tax bill
  • Transfers are tax-free so money earmarked for investing can be shuffled between them without flagging the interest of HMRC – particularly useful if one partner has maxed out their allowances and the other hasn’t
  • Before transferring, remember that the investments will be transferred into the husband, wife or civil partner’s name and they become the legal owner of the assets, so consider this carefully if the relationship is on rocky ground
  • Remember tax rates and reliefs depend on individual circumstances and may change. You should seek professional tax advice if you are unsure of your tax situation

Transfer as cash or investments?

Deciding whether to transfer your investments as cash or in their actual form, known as in specie, is entirely down to personal preference, though both processes have their pros and cons.

Transfer investments as cash

If you transfer investments as cash, you effectively exit the market at the moment you sell until the transfer process is complete, so you could gain or miss out depending on how the market performs during that period.

Another hurdle to consider is capital gains tax. If you sell investments, you may have to pay capital gains tax. The current allowance of £6,000 will halve to £3,000 for the 2024/25 tax year so investors should be careful not to exceed this limit otherwise they are liable for a tax charge.

While you may pay capital gains tax on any profits above your annual allowance, moving the money into an ISA or SIPP means you won’t have to in the future – something that will become very beneficial as allowances dwindle.

Transfer as investments

Those who choose to transfer their investments as they are, known as an in-specie transfer, must check that their new provider can hold all your assets. If a particular investment is not available on the platform you are transferring to, perhaps because they offer a different share class, you can either sell them and transfer as cash, convert the assets to another class, if this is possible, or leave these investments with your existing provider.

Transferring shares directly, as opposed to selling them and buying them back again, means you may avoid paying capital gains tax. This is because transferring shares between your own accounts is not viewed as disposing of them for capital gains tax purposes. However, if you transfer shares to someone else, this may be considered differently.

Can I transfer ownership of a stock without selling it?

Yes, you can. This is known as an in-specie transfer outlined above, where rather than selling down your investments and moving the proceeds across in cash you transfer stocks from your existing provider into an account with another provider. 

Note however, you can only transfer stocks between the same types of account, such as from one ISA to another or from one SIPP to another. You cannot transfer from a general investment account to an ISA or SIPP.

Those wanting to transfer investments into an ISA from a general investment account can make a Bed and ISA transfer, while those wanting to transfer into their SIPP can carry out a Bed and SIPP transfer. This is where your stocks are sold and then repurchased within an ISA or SIPP where the funds are protected from tax on gains and income.

Trading fees can apply on the share sale and again on the share repurchase along with Stamp Duty Reserve Tax, which is charged at 0.5% of the value of the investment you buy. Selling prices are usually lower than buying prices, although platforms do tend to try and carry out the process near simultaneously. 

Don’t worry if you need more time to make an investment selection; simply store your money as cash and then purchase investments as you see fit, or drip feed it into the markets at regular intervals. Some platforms including Bestinvest provide interest payments on cash balances, so the money might not be sitting idle.

Why can transfers take a long time?

While cash transfers typically happen over two to four weeks, in-specie transfers can take more time. This can vary depending on the parties involved and the time of year as public holidays can slow the process down as well as the type of asset you are transferring. 

Typical investment transfer timeframes across the industry

• In-specie share transfers – four to six weeks
• Funds – six to eight weeks
• International shares – expect a longer timescale of about ten to twelve weeks

There can be delays along the way, particularly if providers are slow to respond to one another. Requirements such as letters of authority and valuation requests can sometimes take time.

Some ISA and SIPP providers have a cut-off point for Bed & ISA and Bed & SIPP transactions – this can be up to a week before the end of the tax year – while others require clients to complete the process manually themselves, so it is wise to allow plenty of time.

An ISA allowance cannot be transferred on to the next financial year, so this really is a case of ‘use it or lose it’ by the April 5 deadline. Remember, everyone has an ISA allowance so for couples there is a double gain as they can squirrel away £40,000 in total (£20,000 each), and don’t forget children can save up to £9,000 in a Junior ISA. If you're starting out on your investment journey, please bear in mind that all investments can go down as well as up and you can lose money. 

How Bestinvest can help you make the most of your investment transfer journey

You can invest how you want at Bestinvest with as much free expert support as you like. We’re backed by the resources of our parent company Evelyn Partners, one of the UK’s largest wealth management firms.

It’s easy to arrange free investment coaching with one of our financial planners to talk through your plans and set achievable goals. Investors keen to treat their portfolio to personalised attention can choose one of our affordable investment advice packages.

Independent investors can use our investment search tool to pick their own funds, shares and exchange traded funds (ETFs) from our range of quality investments and refer to expert insights from our collection of guides for investors and insight articles to help develop their skills.

If you prefer managed investments, you can do that too. Our range of Ready-made Portfolios are looked after by Evelyn Partners in-house investment team. They have access to the same research and tools that are used to power the investments of people with hundreds of thousands of pounds to invest.

Invest with Bestinvest      Transfer to Bestinvest