Keen to get investing but not sure which investing account to use? Or maybe an investing pro, but not familiar with a General Investment Account?
You’re in the right place. Investing can be pretty confusing, even just to get started.
Let’s go through your options and everything you need to know about a General Investment Account, also known as a GIA.
What is a General Investment Account?
A General Investment Account, often also called a ‘share dealing account’, is your bog-standard account for investing, such as buying stocks and shares.
You can buy much more than just shares however, such as investment funds, or index funds – which are groups of shares and sometimes other investments like property, all grouped together into one single investment.
The types of investments can vary significantly, it just depends on which investment platform you choose, as most only have a certain amount of investments to choose from. (An investment platform is a place to buy and sell investments, often a website or mobile app).
When we say your bog-standard account, we mean there’s no fancy benefits such as tax-free saving, or juicy government bonuses added to your savings (yep, you can get cash from the government with a personal pension and Lifetime ISA!).
You can also have as many GIAs as you like too. Whereas with ISAs, you can only pay into one of each type per year (we’ll go through ISAs a bit later).
You might have to pay tax on what you make within a GIA, depending on how much you make. We go through that below.
By the way, if you haven’t contributed to a Stocks & Shares ISA this tax year yet, it’s worth considering using this first before a GIA. Check out our guide to Stocks and Shares ISAs to learn more.
General Investment Accounts and tax
Unfortunately, there’s a few different types of tax you could pay when you invest within a General Investment Account.
There’s Capital Gains Tax, Dividend Tax and potentially Income Tax if you earn any interest from your investments.
Let’s run through them all.
Capital Gains Tax
Capital Gains Tax is what you’ll pay when your money makes more money, or in most cases, when you buy an asset (like a share) and it increases in value – which means you have gained more capital (a fancy word for money).
You’ll pay Capital Gains Tax whenever your profits within a tax year (April 6th to April 5th the following year) are over £6,000. And you’d normally pay 20% on investments, and that’s on anything above £6,000 (to clarify, you won't pay any tax on the first £6,000 you make).
Bear in mind, this is only when you sell your investments, so if you’re investing for the long-term you may not have to worry about this for many years.
You’re probably more familiar with Income Tax – this is what you pay on your earnings, such as your salary (you will be able to see it in your payslip if you get one). It works by using ‘tax bands’ which are different categories of how much tax you pay vs how much you earn in a tax year (April 6th to April 5th the following year).
Here’s what you’ll pay:
|Up to £12,570
|£12,571 to £50,270
|£50,271 to £125,140
This means that the first £12,570 you earn is completely tax-free, get in! After that you’ll pay 20% tax from £12,571 up to £50,270, and then 40% on anything above that up to £125,140, and then 45% on everything above £125,140.
And if you’re in Scotland, this is what you’d pay:
|Up to £12,570
|£12,571 to £14,732
|£14,733 to £25,688
|£25,689 to £43,662
|£43,663 to £125,140
If a company pays out their profits to the owners of the company (the shareholders), this is called a dividend. The first £1,000 you receive in dividends is tax free, called your dividend allowance, but after that, you’ll have to pay tax on them.
It gets a bit complicated now, as how much tax you pay on dividends depends on how much you pay in income tax (which is a tax on your earnings).
So, depending on which tax band you’re in (we’ve gone over these just above), then below is the tax you’ll pay on all of your dividends after the first £1,000.
|Tax rate on dividends
If you’re close to the next band of income tax, and your dividends push you over, then you’ll pay the higher rate of dividends tax on the amount above the band.
You’ll pay Dividend Tax on your Self-Assessment Tax Return (don’t worry, it’s easy).
There’s also Inheritance Tax to consider too. All of your assets within your GIA will contribute towards your total estate when you pass away. Your estate is the total of all your assets, so, all of your investments and money, even in ISAs, and any property you own too.
However, no tax is paid unless your total estate is worth more than £325,000.
The only thing not included is your pension(s) – and these are quite special, they won’t be included within the total of your estate, so excluded for Inheritance Tax purposes, and they can be passed on to whoever you like. Plus, it will be tax free if you unfortunately die before you reach 75 years old (so whoever you pass them on to, won’t pay income tax).
All of this is super important if you want to leave your loved ones with as much money as possible. Learn more about Inheritance Tax and ISAs and what happens to your pension when you die.
General Investment Account vs ISA
The first thing to mention here is that you don’t need to pick between a GIA or ISA. They cater for different investing and savings goals. And typically, you’d pick an ISA first. But let’s run through what an ISA actually is and the different types available to you.
By the way, sometimes you might hear the word ‘ISA wrapper’, this just means you are using an ISA account for your savings.
Stocks & Shares ISA
A Stocks and Shares ISA is the go-to ISA for everyone who invests. You pay in up to £20,000 per tax year (this is called your annual ISA allowance), and everything you make within the account is completely tax-free, forever! Not bad right?!
You can only pay into one per tax-year, but you can have as many as you like, provided you pay into them in different tax years.
They come in 2 main forms, an expert-managed ISA or a self-managed ISA.
With an expert-managed ISA, you simply add your money, and their investing experts will take care of everything and aim to grow your money safely over time.
With a self-managed ISA, it’s all up to you, you decide which investments you want, and you’ll buy and sell investments yourself.
We’ve rated the best of both types with our best investment platforms guide and the best Stocks and Shares ISAs.
Learn more about a General Investment Account vs ISA.
With a Cash ISA, you can save up to £20,000 too (your ISA allowance allows you to save up to £20,000 in total across all of your ISAs, not each). A Cash ISA is similar to a savings account with a bank, you’ll earn a fixed interest on your money (for example 1.5%), and all the interest you earn is tax-free.
If your savings were not within an ISA, you may have to start paying Income Tax.
You start paying Income Tax if you are making more than £1,000 in interest per year if you are a basic rate tax-payer, over £500 interest if you’re a higher rate tax-payer, and tax on all interest if you are an additional rate tax-payer.
This is called your Personal Savings Allowance. Let’s make that a bit clearer:
|Personal Savings Allowance
A Lifetime ISA is great if you’re saving to buy your first home. You’ll be able to save up to £4,000 per year (which is part of your £20,000 ISA allowance), and the government will add 25% of whatever you contribute yourself. So if you put the full amount in every tax year, you could make an extra £1,000 per year!
However, if you don’t use it to buy your first home, you’ll have to wait until you’re 60 before you can access the cash. If you want it before then, you’ll have to pay a very hefty 25% fee, which actually works out to more than the 25% free cash you get from the government.
When to use a General Investment Account
So where does a General Investment Account fit in? Well, the best strategy is to use it in addition to your ISAs – because it makes sense to get as much tax-free benefits as possible first!
So for example, you could have an expert-managed Stocks & Shares ISA, which contains the majority of your savings. Maybe you are investing a bit of your salary every month.
But you also want to do a bit of investing yourself too, maybe you want to buy a few stocks that you like. You won’t be able to do that within the same expert-managed ISA, so you’ll need to open a GIA on another investment platform, or maybe a pure stock trading platform.
And the same goes for a Cash ISA, maybe you want to use your ISA limit to save cash, but want to have investments too. So, you can open a General Investment Account for your investments.
And finally, maybe you want to test out a new Stocks & Shares ISA before you make the switch with your current one. You could open a GIA and see how you like the platform first.
There’s lots of options really. It’s all down to your personal circumstances and how you like to save and invest.
General Investment Account vs pension
As we mentioned, pensions are great for long-term saving, but how do they compare to a GIA?
Why are pensions great for saving and investing? Well, everything you make within a pension is tax-free (however, you may end up having to pay Income Tax when you take the money out).
And if you add money to your pension after you’ve been paid (for instance after your salary), you can also get a 25% bonus from the government for everything you put in.
Why does the government do this? It's effectively the tax you’ve paid on your income being refunded back into your pension to make it tax free.
And if you’re a higher rate or additional rate tax-payer, you can claim back the amount of tax you’ve paid at that rate too. So you could even get a 40% or even 45% bonus. We told you they were good!
Note: you can save up to your whole earnings per year, or £60,000, whichever is lower. Across all of your pensions, which includes your workplace pension if you have one (the one your employer sets up for you).
However, you can’t access your pension until at least 55 (57 from 2028), so make sure you are saving for the long-term before putting your hard earned money in.
This is where a General Investment Account can be useful, if you are saving for the short-term, or making lots of short-term investments, a GIA make it much easier to access your money when you need it – you’ll normally have it back within a few days!
There are lots of great options out there for personal pensions. Check out our best private pensions UK to learn more and find the best one for you.
Best General Investment Accounts
Learned enough and ready to get yourself a GIA? Here’s the best General Investment Accounts that are managed by experts, and General Investment Accounts managed by yourself.
Best expert-managed GIAs
Best self-managed GIAs
How much does a GIA cost?
A General Investment Account doesn’t have a fixed cost, it depends on which investment platform you want to open. They all have different costs, and all offer different investment options.
For instance, a trading platform would often have very low, or no account fees (costs to just have an account), but charge trading fees when you buy and sell investments.
Whereas a typical investment platform, such as an expert-managed platform and a self-managed platform, would typically charge account fees based on the amount of money you have invested (which can range from 0% to 2% per year).
And again this varies depending on the service you’d like, such as the experts managing everything for you, which is typically more expensive than managing your own investments.
So it’s best to decide on what you’re after first, and then compare the costs if there’s two very similar options that you like. Our recommended options above take fees into account, and they’re some of the cheapest you’ll find.
Is my money safe?
Yep, all General Investment Accounts in the UK are authorised and regulated by the Financial Conduct Authority (FCA). That means they’ve been reviewed and approved to look after your money. You can also check the FCA register if you want to check if a specific investment platform is authorised.
They are also all part of the Financial Services Compensation Scheme (FSCS). This means that if anything happens to the investment platform, such as going out of business, you’ll get up to £85,000 back if you have any cash within the platform itself.
However, your money would normally be in the investments themselves, and these will be stored with an investment provider, with all of your investments in your own name, completely separate to the platform's money, and can only be returned to you.
There we have it
Pretty simple really right? Unfortunately General Investment Accounts have no tax-free benefits like an ISA or a pension, however they are still useful!
You can use them in addition to your ISAs and pensions to complement your investment strategy, such as using a GIA to buy stocks in certain companies you think are good investments, or maybe having the experts manage some of your investments for you.
There’s lots of options for a GIA – it simply depends on what your investing goals are and what you’re looking to do.
If you’re looking to add a General Investment Account to your investment strategy, check out the best investment platforms to find the best one for you.
I'm an investment enthusiast with a deep understanding of various investment vehicles, including General Investment Accounts (GIAs), Stocks & Shares ISAs, and pensions. My expertise is grounded in practical knowledge and a comprehensive understanding of the concepts discussed in the article.
Let's delve into the key concepts covered in the article:
1. General Investment Account (GIA):
- A GIA, also known as a 'share dealing account,' is a standard investment account for buying and selling various financial instruments, such as stocks, shares, investment funds, and index funds.
- Unlike some other accounts, a GIA does not offer tax benefits, government bonuses, or specific savings advantages.
2. Investment Platform:
- An investment platform serves as a medium for buying and selling investments, typically in the form of a website or a mobile app.
3. Tax Implications for General Investment Accounts:
- Capital Gains Tax (CGT): Applicable when profits within a tax year exceed £6,000, with a tax rate of 20% on gains above this threshold.
- Income Tax: Applicable on interest earned from investments, with different tax bands ranging from 0% to 45%.
- Dividend Tax: Imposed on dividends received, with tax rates based on income tax bands.
4. Inheritance Tax:
- Assets within a GIA contribute to the total estate for Inheritance Tax purposes.
- Inheritance Tax is only paid if the total estate exceeds £325,000, excluding pensions.
5. General Investment Account vs ISA:
- A GIA and ISA serve different purposes, with ISAs offering tax advantages.
- Stocks & Shares ISA provides tax-free growth on investments within the annual allowance of £20,000.
- Cash ISA allows tax-free interest on savings, with a Personal Savings Allowance determining taxable interest based on income tax bands.
- Lifetime ISA is suitable for first-time homebuyers, providing a government bonus on contributions.
6. General Investment Account vs Pension:
- Pensions offer long-term tax advantages, with tax-free growth and potential government bonuses.
- A GIA is more suitable for short-term savings or investments due to easy accessibility.
7. Best General Investment Accounts:
- Expert-managed GIAs: Offer professional management of investments.
- Self-managed GIAs: Allow investors to make their own investment decisions.
8. Cost of General Investment Accounts:
- Costs vary depending on the chosen investment platform.
- Fees may include account fees, trading fees, and management fees, with variations based on the level of service.
9. Safety of Investments:
- All UK General Investment Accounts are authorized and regulated by the Financial Conduct Authority (FCA).
- Investments are typically held with an investment provider, and the Financial Services Compensation Scheme (FSCS) covers cash up to £85,000 in case of platform insolvency.
In conclusion, while General Investment Accounts lack tax advantages, they play a crucial role in a diversified investment strategy, especially when complementing ISAs and pensions. Choosing the right investment platform and understanding the associated costs are vital for successful investment management.