You may need to think about tax when investing. But you could benefit from tax savings, mainly through pensions (either personal or workplace) and Individual Savings Accounts. Your tax treatment is personal to you. It can be a good idea to look at the information available on the gov.uk website and speak to a professional adviser if you’re unsure.
When you invest you may also earn income from your investments. And if you do, you might have to pay income tax on that too.
The types of income you can earn from investments include dividends from shares, interest payments from bonds and distributions from funds. Distributions are where a fund passes on your share of any income it earns.
If you’re able to invest in an Individual Savings Account, or ISA, you won’t pay tax on any investment income or investment gains you make in that ISA. To see this year's annual ISA allowance visit our Guide to ISAs page.
You can split this annual allowance across a cash, innovative finance, lifetime and stocks and shares ISA but can only pay into one of each type in any one tax year, up to the annual ISA limit.
The dividend allowance lets you receive up to a set level of dividends, free of income tax, in each tax year. And, depending on your circumstances, the personal savings allowance potentially lets you receive up to a set level of interest from investments and savings, free of income tax, in each tax year.
Capital Gains Tax
This is the tax you’ll have to pay on the profit you make when you sell your investment. You only have to pay this tax if the amount you receive from selling your investment is above your annual tax-free allowance for capital gains.
Your family may have to pay this after you die if you leave assets worth more than a certain amount, including investments, and depending on who you leave them to.
You can find out more about taxes on the gov.uk website which includes all the latest tax rates and tax allowances that might be relevant for your personal circumstances.