What is a general investment account? A short guide
This content is for information purposes only and should not be taken as financial advice. Every effort has been made to ensure the information is correct and up-to-date at the time of writing. For personalised and regulated advice regarding your situation, please consult an independent financial adviser here at Castlegate in Grantham, Lincolnshire or other local offices.
A general investment account (GIA) can be thought of a bit like a regular savings account, except you are putting your money into investments – e.g. bonds and shares – rather than cash.
What makes a GIA different from other investment “vehicles,” such as ISAs and pensions? Below, our Grantham financial advisers explain the key features of general investment accounts and how they relate to a financial plan.
Please get in touch to speak with a financial adviser for a free consultation and more details.
01476 855 585
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The Basics: What Constitutes a General Investment Account?
Various providers, including banks and dedicated investment platforms, offer general investment accounts (GIAs) in the UK. Provided you meet their criteria, opening an account can be relatively straightforward—similar to opening a bank account.
There is typically no limit on how much you can invest in a GIA. This type of account can offer a range of investments, including exchange traded funds and investment trusts, which allow customers to buy and sell investments from across the world, typically via online login.
General Investment Accounts and Tax
A GIA offers a great advantage by not imposing a “cap” on the value of investments, but it does not offer the tax benefits as other investment “vehicles”.
The ISA allowance, for instance, allows an individual to contribute up to £20,000 per tax year to ISAs. All capital gains, interest, and dividends earned inside an ISA (e.g. a Stocks and Shares ISA) will be tax-free.
By contrast, investments held in a GIA may be subject to capital gains tax (CGT), income tax or dividend tax.
A pension also allows for tax-free growth within the account. Moreover, once an individual reaches their Normal Minimum Pension Age (NMPA), they can withdraw up to 25% of the value of their pension(s) without income tax.
Mitigating Tax When Using a GIA
This is not to say that a GIA cannot be useful. It can often still be used in a tax-efficient manner.
For instance, in 2024-25, the capital gains tax allowance stands at £3,000. This means an individual can generate gains from selling (“disposing of”) investments in a GIA up to this threshold each tax year without facing capital gains tax.
Moreover, interest earned from investments inside a GIA (e.g. coupons from bonds) falls under an investor’s personal savings allowance (PSA). This could allow for many – sometimes all – of these returns to be received tax-free.
For Basic Rate taxpayers, up to £1,000 can be earned from interest each tax year without tax. For someone on the Higher Rate, the tax-free threshold is £500. Above these limits, income tax rates apply.
Setting Up and Managing a General Investment Account
Before signing up for a GIA, consider your financial goals. What do you want your portfolio to achieve? How long will you be investing for, and what kind of risk are you prepared to take?
It is also important to shop around for different providers. Do not simply approach your bank. Better deals may be available elsewhere, offering more investment choices and lower fees. Think about what you want out of an investment platform, such as ease of usability and good customer service.
Consider how you will fund the account. Will you make infrequent “lump sum” contributions? Or will you fund it regularly out of your monthly salary? What about other investment accounts you may already own? Will you combine these accounts or keep them separate?
A financial adviser can help you work through these important questions using the information you need.
How to Get the Most From Your GIA
Since a GIA does not offer the same “tax shielding” as other tax wrappers like an ISA allowance or pension, take time to consider how it will integrate with your tax plan. How will you protect your hard-earned returns from income tax, capital gains tax and tax on dividend income?
One idea is to use your tax benefits and allowances strategically in light of the tax year renewal date. For instance, instead of generating many taxable capital gains in a single tax year, could you “spread out” the asset disposals across multiple tax years—utilising your capital gains tax allowance fully each year? More broadly, a similar approach could also be taken with your Personal Savings Allowance and Personal Income Tax Allowance, helping you keep more of your income.
Consider using your GIA strategically with your ISA allowance. For example, if you receive significant dividend income from a GIA (taking you over your dividend allowance), could you benefit by gradually moving these investments to your Stocks and Shares ISA (e.g. using the “bed and ISA” approach)?
Make sure to diversify your portfolio appropriately and monitor it. A financial adviser can be very helpful with this process, offering insights which you may miss on your own. An adviser can also act as a “sounding board” for your questions and concerns about your portfolio, providing an expert second opinion and guarding against impulsive decisions which you may regret later (e.g. “panic selling” during a market sell-off).
Occasionally, it will be necessary to rebalance your portfolio to keep your asset allocation in line with your long-term strategy. Here, a professional can help you assess your investment options and make decisions which you feel confident in, providing more peace of mind afterwards.
Invitation
If you are interested in discussing your own financial plan or investment strategy with us, please get in touch to arrange a no-commitment financial consultation at our expense:
01476 855 585
info@casfin.co.uk
