Exit Menu  

How are investments taxed?

For ISAs and Junior ISAs there is no tax to pay

All income and gains on investments held within ISAs and Junior ISAs are completely tax free.

This is one of the great benefits of investing via an ISA. It's always sensible to use your ISA allowance first, before making any general investments.

General Investments, there may be tax to pay

The main difference between ISAs and general investments is simply that there may be tax to pay on general investments.

Usually, unless you do not pay income tax, you effectively pay tax on any dividend income generated by the general investment at your marginal income tax rate. This is the case even if the income is retained within your investment and reinvested.

However, the mechanics of tax on investment income are a bit complicated, as some tax is deemed to have already been paid. If you are a higher rate taxpayer, you usually have to pay some additional tax. If you are a basic rate taxpayer, there is usually no more tax to pay and if you do not pay income tax you can usually claim the tax back.

In addition, you may have to pay tax on any capital gains, if your total gain for the year across all your investments exceeds your annual capital gains allowance.

The amount of tax pay depends on both your personal financial situation and the actual performance of the investments, so it can get quite complicated. The government's money advice service summarises the tax treatment of general investments in unit trusts and OEICs.

We use cookies to make this site work better for you. Ok, don't tell me again