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In general terms, income from funds is taxed as income and may attract higher or additional rates of tax (up to 45%). Capital gains are liable for Capital Gains Tax if the gain is not within your tax free allowance (£11,100 for the tax year 2016/2017), profits could attract tax up to 20%.

Where to invest when your ISA allowance has gone and pensions don't suit your needs?

Investing in unit trusts and OEICs is not as tax efficient as making your investment via an ISA or a SIPP. But, if you have fully used your ISA allowance and your SIPP allowance or it doesn’t suit you to invest in pensions at the current time, it’s worth thinking from a tax perspective, about the merits, of investing in funds - particularly in comparison to shares.

Every time you buy or sell an asset it will create a gain or a loss.  These will be combined with your other gains and losses to determine your overall capital gains tax position.

The great thing about funds is that you can be invested in an actively managed portfolio (or perhaps a fund-of-funds) where the gains and losses associated with an actively managed portfolio are made within the fund - meaning that no gains and losses are crystallised for you until you finally sell your units or shares.

Funds offer a legitimate way to defer your gains and losses

Assuming that the investment continues to meet your investment goals, then you can defer crystallising any gain (or loss) until it suits you.

This means it might be possible to time the sale of your investment in a fund to a year when you have enough of your capital gains tax free allowance to offset any gains in part or in full.

Please note the value of investments can go down as well as up and past performance is no guide to the future. If you are unsure of the tax implications of any investment - you should seek professional advice.


Past performance is not a reliable indicator of future returns

The value of your investment can go down as well as up, and you can get back less than you originally invested.

The Bestinvest Online Investment Service, including any account analysis and investment reports provided by our guidance services, is an online execution-only dealing service for investors who want to make their own investment decisions. It does not provide advice on the suitability of products and investments; if you are unsure about the suitability of any investment you should seek professional advice. Clients of our Investment Advisory Service and Managed Portfolio Service can use the website to obtain current valuations of their investments but cannot trade on these accounts online and should call their adviser if they wish to discuss changes to their investments.

Past performance or any yields quoted should not be considered reliable indicators of future returns. Restricted advice can be provided as part of other services offered by Bestinvest, upon request and on a fee basis. Before investing in funds please check the specific risk factors on the key features document or refer to our risk warning notice as some funds can be high risk or complex; they may also have risks relating to the geographical area, industry sector and/or underlying assets in which they invest. Prevailing tax rates and relief are dependent on your individual circumstances and are subject to change.

Issued by Bestinvest (Brokers) Limited (Reg. No. 2830297), which is authorised and regulated by the Financial Conduct Authority. Financial services are provided by Bestinvest (Brokers) Limited and other companies in the Tilney Bestinvest Group, further details of which are available here. This site is for UK investors only.
© Tilney Bestinvest Group Ltd 2016.

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