What is a general investment account?
- Shunil Roy-Chaudhuri, Personal Finance and Investment Writer
- 18 October 2023
- 5 mins reading time
A general investment account (GIA) is, quite simply, an account that holds investments. Investments held in a GIA are subject to tax, unlike investments held in an ISA or a pension (assuming the pension contributions don’t exceed tax-efficient pension allowance levels).
GIAs can hold the following types of assets:
Investment funds such as unit trusts and exchange-traded funds (ETFs)
Investment trusts
Company shares (equities), UK and overseas
Government bonds
Corporate bonds
Commercial property.
Some GIA providers may offer access to the full range of investment assets, but others will offer a more restricted range, perhaps limited to investment funds.
The capital growth, dividends and income of GIAs are all subject to tax as follows.
Capital gains tax
When you sell an investment that’s increased in value, you pay capital gains tax (CGT) on the profit (or gain). It’s the profit you make that’s taxed, not the amount of money you receive. In the 2023/24 tax year, the CGT allowance is £6,000, so the first £6,000 of any capital gain in a GIA is tax free. But from 2024/25 the annual allowance will fall to £3,000. CGT rates for the sale of investments held in a GIA are 10 percent for basic rate taxpayers and 20 percent for higher or additional rate taxpayers.
Dividend tax
Dividends are usually cash payments from earnings that companies pay to their shareholders. In the 2023/24 tax year, the first £1,000 of dividend income is free of tax. But this dividend allowance will halve to £500 in the 2024/25 tax year. Dividends that exceed the allowance are subject to tax as follows:
If your dividend income straddles two tax bands, then you’ll pay the higher rate of dividends tax on the amount above the threshold between the bands.
Income tax
You are liable for income tax on any interest from your investments. You pay this at your marginal rate of tax, which is the highest rate of income tax applying to your income after deducting all of your personal allowances and tax reliefs. For example, if your annual income, including interest payments from your GIA, is less than your annual tax-free personal allowance of £12,570, then you won’t pay any income tax. But if your annual income, including interest payments from your GIA, exceeds the additional rate tax threshold of £125,140, you’ll be liable for income tax at the 45 percent rate.
If you receive both interest and dividend income, then the dividend income is considered to be the top slice. In other words it is taxed at your highest marginal rates, after the taxation of earnings and savings income.
ISAs, due to their tax benefits, have some advantages over GIAs. But you can only invest up to £20,000 a year in an ISA, whereas you can invest an unlimited amount in GIAs.
Pensions also have tax benefits that are lacking in GIAs. But there is a £60,000 annual limit on how much you can contribute tax efficiently to a pension. Moreover, you can’t usually make withdrawals from pensions until the age of 55 (this goes up to 57 from 6 April 2028). So a GIA might, for example, be more appropriate for a young person wanting to save for a deposit on a property, although this would depend on specific circumstances.
Other tax-efficient alternatives to GIAs can include venture capital trusts (VCTs) and enterprise investment schemes (EISs). But these are relatively high risk and you might want to seek advice before investing in them. Onshore and offshore bonds may also be helpful in tax planning, but these can be quite complex and you may want professional advice here too.
GIAs can, though, enable you to make use of CGT and dividend tax allowances and benefit from the relatively low tax rates applied to capital gains and dividends.
For example you may, if appropriate, be able to time purchases and sales of investments to aim to make regular use of your annual capital gains allowance. Even so, the value of investments can go down as well as up.
A financial adviser can help you assess how GIAs might dovetail into your financial plans. At Schroders Personal Wealth one of our principles is to have regular reviews with a financial adviser. This can help ensure you are positioned to meet your financial goals while making the most of tax opportunities.
Important information
This article is for information purposes only. It is not intended as investment advice.
Fees and charges apply.
The retirement benefits you receive from your pension plan depend on a number of factors including the value of your plan when you decide to take your benefits which isn’t guaranteed and can go down as well as up. The benefits of your plan could fall below the amount(s) paid in.
The value of investments and the income from them can fall as well as rise and are not guaranteed. The investor might not get back their initial investment.
Tax treatment depends on the individual circumstances of each client and may be subject to change in the future.
In preparing this article we have used third party sources which we believe to be true and accurate as at the date of writing but can give no assurances or warranty regarding the accuracy, currency or applicability of any of the contents in relation to specific situations and particular circumstances.
Any views expressed are our in-house views as at the time of publishing. This content may not be used, copied, quoted circulated or otherwise disclosed (in whole or in part) without prior written consent.
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