The number of investors using the so-called “Bed and ISA” strategy surged last year as savers scrambled to shield their money from Labour’s capital gains tax (CGT) raid.

Stockbroker Hargreaves Lansdown revealed a 59% jump in the number of clients deploying the tactic compared to the previous tax year, as fears over higher tax bills took hold.

According to AJ Bell, “a Bed and ISA deal lets you sell an investment in your Dealing account and buy it back in your ISA”. It is meant to allude to the idea that you put your shares to bed overnight, then wake up to them the next day.

The rush follows Chancellor Rachel Reeves’ decision to hike capital gains tax (CGT) rates on stocks and shares—rising from 10% to 18% for basic-rate taxpayers and from 20% to 24% for higher earners in last year’s Budget.

The Bed and ISA strategy allows investors to sell assets held outside a tax wrapper that shields them from tax and repurchase them within an Individual Savings Account (ISA), protecting future gains from CGT and dividend tax.

Sarah Coles, of Hargreaves Lansdown, said: “There has been a jump in Bed and ISA this tax year, as higher capital gains tax rates and miserably low allowances make the move even more rewarding.”

However, Ms Coles warned investors to be cautious not to breach their £3,000 annual CGT allowance, as wealthier savers risk triggering a tax charge. Despite this, experts argue the long-term benefits of tax-free growth outweigh the costs.

Investment platform Interactive Investor also reported a record-breaking summer for Bed and ISA transactions ahead of the October CGT rise.

This tax grab follows the last Tory government’s decision to slash the CGT allowance from £12,300 to just £3,000. A higher earner sitting on £4,000 in investment gains would now face a £240 tax bill, whereas in 2022-23, they would have owed nothing.

On top of this, the dividend allowance has been cut from £2,000 to £500, leaving higher-rate taxpayers earning £2,000 in dividends paying an extra £500 in tax.

Capital gains tax revenues are set to double from £15bn to £31bn by 2029-30, with last year’s tax hikes and the crackdown on non-doms expected to add £1bn to the Treasury’s coffers.

Investors have until April’s tax year-end to make the most of their allowances, with up to £20,000 able to be sheltered in ISAs, free from tax on growth and income.