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Choosing the right investment account: GIA or ISA

When you’re looking to grow your wealth, there are some simple things you can do to make your money go further. It all starts with getting the right investment account for your goals. So, should you pick an ISA or GIA: General Investment Account? However, there are several types of ISAs.

There’s no denying that the financial world can be complicated and full of jargon – which can be off-putting when you’ve already got a busy life to navigate; there are always other priorities that distract you from completing your personal finance to-do list.

But investing doesn’t need to be complicated. At Moneyfarm, we think that a big part of our role is to simplify investing and change your relationship with your money.

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GIA or ISA: Summary Table

⚖️ Is a GIA better than an ISA?Not really, it’s more like a complement to it
✅ Can I have more than one GIA account?Yes, you can have multiple GIA accounts
🤑 Does a GIA account have any tax benefitsNo, there are no tax benefits
🏅 Best reason to invest in GIAWhen an ISA is not an option or ISA allowance has been reached
🏆 Best reason to invest in an ISATax advantages

Does my account impact my investments at Moneyfarm?

Whether you’re looking to invest money in an ISA or GIA, you’ll be given the same level of investment advice to help you reach your goals. You can also open a number of different investment accounts with Moneyfarm, that cater for everything from medium-term goals to your pension fund.

If you’re hoping to help your children on the property ladder, are planning a sabbatical, or are planning a career change, you might be looking for a more flexible account to help grow your money. Our stocks and shares ISA or GIA (general investment account) may suit your needs, but it ultimately depends on your financial situation.

What is a stocks and shares ISA?

A stocks and shares ISA is a tax-efficient and straightforward way to grow your money over the long term. You can invest up to £20,000 each financial year, and any growth in the value of your money and any income can build up protected within your tax-free wrapper.

You usually pay capital gains tax on any profit you make on your investments above your annual allowance. This is £12,300 for the 2021/22 tax year, the same as it was in 2020/21. While this sounds like a lot, it’s a realistic target to aim for when you’re investing in the long term.

If you invest your money in an ISA, you won’t need to pay a thing in capital gains or dividend tax. Making the most of the tax benefits available to you is crucial for maximising your returns over the long term.

The ISA allowance is an individual one, which means couples can invest up to £40,000 in their ISA each year. However, it resets annually, and you can’t roll it over into the new tax year, which means you have to use it or lose it!

A common misconception is that you lock your money away when you invest in a stocks and shares ISA. Whilst it’s important to stress how important long-term investing is for your returns, ISAs have evolved to be much more flexible, allowing you to take money out and replace it within the tax year without it affecting your overall allowance.

It’s also getting easier to take your money out. With wealth managers like Moneyfarm, the flexibility of our portfolios and platform means you can get your money out quickly and without paying a thing.

The tax benefits of an ISA are subject to change in the future, so it’s important that you make the most of the generous tax benefits available to you. Simple yet effective, ISAs are popular with investors of all experiences looking to grow their money.

What is a general investment account?

General Investment Accounts (GIA) are good options for investors who have already used up their ISA allowance for the year. There are no tax benefits to be found in your GIA, which means there are no limits to how much you can put in each year.

This flexibility means you can put in and withdraw as much as you like from your GIA. You also won’t need to pay dividend tax on any income under the £2,000 annual allowance.

You won’t need to pay capital gains tax on any profit you make under the £12,300 threshold, although this allowance includes any profit you make during the tax year from a business, second home, or heirloom.

You don’t want to be stuck in a situation in the future where you have to pay more tax than you need to because you didn’t invest through your ISA.

You can open as many GIAs as you like. However, GIAs usually count as part of your estate when determining how much inheritance tax (IHT) is due. You can pass an ISA onto a spouse free from IHT.

You can hold a broad range of investments in your ISA or GIA account, including funds, shares, investment trusts and ETFs. Picking the investment account to help you reach your goals doesn’t need to be difficult, although you should seek financial advice if you’re unsure.

GIA vs ISA: The difference between the two accounts

Here are some questions that compare GIA vs ISA accounts and showcase the differences.

Can I have more than one GIA account?

You can have multiple GIA accounts and pay into any or all of them each tax year.

Can I have more than one ISA account?

You can have more than one ISA account, but you can only open and pay into one ISA account each tax year.

How much can I pay into a GIA account?

A GIA account has no limit. You can pay as much as £85,000 into a GIA account each week.

How much can I pay into an ISA account?

You can pay £20,000 into an ISA account each tax year to enjoy the tax benefits.

What are the tax benefits of a GIA account?

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A GIA investment account offers no tax benefits. However, you will pay income tax on any income received, capital gains tax, and dividend tax on any gains realised in a GIA account. The tax paid will depend on your taxpayer rate, either a basic rate taxpayer or a higher rate taxpayer.

What are the tax benefits of an ISA account?

An ISA account has multiple tax benefits. For example, you don’t pay income tax, capital gains tax and dividend tax on the investments held in an ISA.

Why should I invest in a GIA?

People use the GIA account when an ISA account is not suitable or when they have reached the ISA allowance limit for the tax year and still want to invest.

Why should I invest in an ISA?

People invest in ISA accounts to take advantage of the tax benefits as ISAs are tax wrappers.

Withdrawing money from a GIA

You have access to and withdraw your money in your GIA investment at any time without any restrictions.

Withdrawing money from an ISA

You can withdraw money from an ISA account without affecting your annual allowance as long as it is a flexible ISA account. Some types of ISA account also allow withdrawals, such as easy-access cash ISA.

Do I pay tax on GIA withdrawals?

You don’t pay any tax on withdrawals from a GIA account.

Do I pay tax on ISA withdrawals?

You don’t have taxes or lose tax benefits when you withdraw money from an ISA account.

Can I transfer a GIA?

You can transfer GIA accounts and switch between providers. However, some providers offer a ‘Bed and ISA’ service that allows you to move investments held in an ISA into a GIA account with minimal price risk.

Can I transfer an ISA?

You can transfer an ISA account from one provider to the next. You can also transfer most investments held in one type of ISA to a different type of ISA. However, some ISAs have transfer rules and restrictions.

Can a GIA be a joint account?

GIA allows you to hold an account jointly with others.

Can an ISA be a joint account?

ISAs do not offer joint accounts; you can’t hold your ISA account jointly with other people.

Investment advice

When you invest with Moneyfarm, we provide you with a unique combination of regulated investment advice and discretionary fund management.

After getting to know more about you, your financial background, and your goals, we’ll assign you an investor profile that outlines your risk profile. We’ll then match you with an investment portfolio built explicitly for you and managed by our team of experienced fund managers to reflect your profile.

You can always get in touch with one of our qualified investment consultants if you’ve got any questions, although we won’t be able to give you advice on which accounts to open.

FAQ

Is GIA better than an ISA?

A GIA is not better than an ISA. An ISA or GIA investment choice depends on an investor’s profile.

Can I transfer a GIA to an ISA?

Yes, you can transfer a GIA to an ISA. You need to sell your GIA investments and then move the cash into an ISA.

How is ISA & GIA taxed?

With an ISA, there are no income, capital gains and dividend taxes. With a GIA, there are income, capital gains and dividend taxes.

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As with all investing, your capital is at risk. The value of your portfolio with Moneyfarm can go down as well as up and you may get back less than you invest.