What do I need to know about tax?

  • Updated

Investing in ETFs through InvestEngine can be a tax-efficient way to grow your wealth - especially when using accounts like ISAs or SIPPs. But if you’re investing through a General Account, you will need to consider tax on interest, dividends, or capital gains.

Here’s a simple overview of how tax works for UK investors.

Tax-free wrappers: ISA and SIPP

If you’re investing through a Stocks & Shares ISA or Self-Invested Personal Pension (SIPP):

  • You won’t pay Income Tax, Dividend Tax, or Capital Gains Tax on your investments
  • There are annual contribution limits for both, check our ISA and SIPP FAQs for details
    Withdrawals from a SIPP may be subject to tax depending on your age and how much you take

General Investment Account (GIA)

If you're using a GIAt, your investments will be subject to UK tax depending on how much income or gain you make.

You may need to pay:

  • Dividend Tax - if you earn over your tax-free dividend allowance (£500 in the 202025/26 tax year)
  • Capital Gains Tax (CGT) - if your total gains across all investments exceed the annual CGT allowance (£3,000 in 2025/26)
  • Income Tax - on any interest you earn (for example, from bond ETFs), above your Personal Savings Allowance (£1,000 for basic-rate taxpayers; £500 for higher-rate)

Understanding marginal tax rates on investment income

If your investment income goes over the relevant tax-free thresholds, the excess will be taxed at your marginal rate, the rate of tax you pay on your regular income.

For example:

  • Basic-rate taxpayers (earning £12,571–£50,270) would pay:
    • 20% on interest
    • 8.75% on dividends
    • 10% on capital gains
  • Higher-rate taxpayers (£50,271–£125,140) would pay:
    • 40% on interest
    • 33.75% on dividends
    • 20% on capital gains
  • Additional-rate taxpayers (over £125,140) would pay:
    • 45% on interest
    • 39.35% on dividends
    • 20% on capital gains

For the latest tax rules, visit HMRC: Tax on savings and investments.

InvestEngine doesn’t provide personal tax advice. Your individual circumstances may affect how much tax you pay and you’re responsible for reporting any taxable income to HMRC.  Depending on your situation you should consult HMRC or a qualified tax adviser for personalised guidance.

Need more information?

You can also download your CTC or CGT Report from your dashboard at the end of the tax year.


 

Related articles