“Bed and breakfasting” was once a popular strategy for crystallising capital gains within your annual CGT allowance. You sold shares at the end of one day and bought them back the next morning — hence the name. HMRC closed this loophole in 1998, but legal alternatives still exist. Here's how it all works.
The original strategy
Before 1998, investors would sell shares that had increased in value, realise a gain within their annual CGT exemption (£3,000 for 2026/27), and immediately repurchase the same shares. The result: the gain was crystallised tax-free, and your cost basis was reset to the higher price. Repeat annually, and you could grow a portfolio with minimal CGT liability.
For example, if you bought 1,000 shares at £5 (£5,000 cost) and they rose to £8 (£8,000 value), selling would crystallise a £3,000 gain — exactly within the annual exempt amount. You'd repurchase at £8, making your new base cost £8,000.
The 30-day rule that killed it
Since 1998, HMRC's “same-day” and “30-day” rules mean that if you buy back the same shares within 30 days of selling them, the sale is matched to the repurchase for CGT purposes. The gain is effectively deferred, not crystallised. Your cost basis does not reset.
Specifically, when calculating gains, HMRC matches disposals to acquisitions in this order: (1) same-day purchases, (2) purchases within the following 30 days, (3) the Section 104 holding (your average cost pool). The 30-day rule makes classic bed-and-breakfast pointless.
Legal alternative 1: Bed and ISA
Sell shares in your general investment account (GIA) and repurchase the same shares inside a Stocks & Shares ISA. The 30-day rule does not apply because the repurchase is in a different tax wrapper. The gain is crystallised (use your annual exempt amount), and all future growth is tax-free inside the ISA.
Limits: you can only contribute up to £20,000/year into ISAs. So this strategy is capped at moving £20,000 worth of holdings per tax year into the ISA shelter.
Legal alternative 2: Bed and spouse
Transfer shares to your spouse or civil partner (transfers between spouses are CGT-free). Your spouse then sells the shares, using their own annual exempt amount. This effectively doubles the household's CGT-free allowance to £6,000 combined.
Important: the transfer must be a genuine, outright gift. HMRC can challenge “bed and spouse” arrangements if the shares are immediately returned or if there's evidence the transfer was not genuine.
Legal alternative 3: Bed and pension
Similar to bed and ISA — sell in your GIA and contribute the proceeds to your pension (SIPP). You crystallise the gain, get tax relief on the pension contribution, and all future growth is tax-free within the pension. The downside: the money is locked away until age 57 (rising to 58 in 2028).
Practical example for 2026/27
You hold £50,000 of shares in a GIA with a base cost of £35,000 — a £15,000 unrealised gain. In one tax year, you could:
- Sell £10,000 worth (crystallising ~£3,000 gain = within annual exempt amount, tax-free)
- Repurchase inside your ISA (within £20,000 ISA limit)
- Transfer some shares to your spouse who repeats the process with their allowance
- Next tax year, repeat with the next tranche
Over 3–4 years, you could migrate the entire portfolio into tax-efficient wrappers with zero CGT paid.
What about the 30-day rule and different share classes?
The 30-day rule applies to “the same shares.” Buying a different share class, a different fund tracking the same index, or an ETF instead of the original fund does not trigger the rule. For example, selling an S&P 500 tracker from Provider A and buying one from Provider B is not caught — they are different securities. However, HMRC could challenge this if the arrangement is clearly artificial with no commercial purpose beyond tax avoidance.
Further reading
For more on how capital gains interact with your income, see our capital gains vs income tax guide. To understand how ISAs shelter your investments, read the Stocks & Shares ISA tax implications guide.