Home Finance Difference between ISA, GIA and SIPP

Difference between ISA, GIA and SIPP


Before putting to action your investment plan, it is fundamental to understand the different types of investment accounts available that you can open and also the tax implications. Spending some time to evaluate the situation, study and read about all the assets is definitely the right thing to do. It is wise to gather information and have a clear vision before starting to invest. If you don’t do so and start right away you will probably put your money at risk. If you live in the United Kingdom, you will probably find different investment options. At some point you will ask yourself if it’s better to invest in GIA or ISA, or open a SIPP. Let’s see what these acronyms refers to and the differences between these accounts.

What is an Individual Savings Account

An ISA, that stands for Individual Savings Account, is a specific category of investment arrangement. This type of saving account is a lucrative option, because you will not need to pay taxes on the returns it generates. Financial gains, income and interest will be exempted from both Income Tax and Capital Gains Tax. ISAs are a valuable option for residents of the UK or people employed by the Crown and the main requirement is that the person who is holding the account should have a National Insurance number. This saving account has a limit of the amount of money you can invest each year. For the tax year 2021/2022 the annual allowance is fixed at £20,000. If you opt for an Individual Savings Account, consider that there are four kinds you can choose from – Cash ISAs and Stocks & Shares ISAs, Innovative finance ISAs, Lifetime ISAs.

What is a General Investment Account

A general investment account, known and indicated as GIA, is an account that let you hold investments outside of tax wrappers, like an ISA or a pension. This kind of account presents a great advantage: investors have no limit on the amount they want to invest in it. This does not happen with an ISA. When investing in a GIA, basically you can access your money whenever you want. Nevertheless, is it preferable to invest for at least five years. You can pick stocks, ETFs (exchange-traded funds), investment trusts, funds, there are several assets to choose from. This is a great option for the ones who have already invested in ISAs and once reached the limit still have more money to allocate. GIA is not exempted from taxation. You will need to pay the Capital Gains tax on any profit you make if the amount is above the annual allowance (for the current tax year 2021/2022 is £12,300).

What is a Self-Invested Personal Pension

SIPP stands for Self-Invested Personal Pension. It’s a valuable option if you are interested in a long-term investment. If your goal is having extra money after your retirement, aside the workplace pension, SIPP is right for you. This is similar to the pension set up by your employer, but in this case you are going to manage it and make your own choices. Of course, it’s not necessary that you actually do it alone by yourself. Finding the right assets, checking the market and manage your portfolio are some actions that require a good amount of knowledge. So, you can find your own advisor to help you set up your SIPP, maybe starting from the basis of an investment plan. It will be totally up to you to decide how much money you want to allocate, if it’s going to be a long-term investment and your approach to the volatility of the markets.


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