The UK Tax Wrapper Stack
The UK gives investors two powerful tax-free wrappers. Use both before putting anything in a taxable account.
Stocks & Shares ISA — You can invest up to £20,000 per tax year (April 6 to April 5). All gains, dividends, and interest inside an ISA are permanently free of Capital Gains Tax and Income Tax. You can hold funds, ETFs, investment trusts, and shares inside it. Unused allowance does not carry forward — use it or lose it each year.
SIPP (Self-Invested Personal Pension) — Contributions attract tax relief at your marginal rate. A basic-rate (20%) taxpayer contributing £800 gets topped up to £1,000 by HMRC. Higher-rate taxpayers can claim an additional 20% via self-assessment, meaning a £1,000 contribution effectively costs £600. The 2025/26 annual allowance is £60,000 (or 100% of earnings, whichever is lower). You can access a SIPP from age 57 (rising to 57 in 2028).
Contribution Priority
- Employer pension to get the full employer match
- Stocks & Shares ISA (up to £20,000/year — use this for medium-term goals)
- SIPP top-up (especially powerful for higher-rate taxpayers)
- General investment account (taxable, use only after exhausting the above)
What to Hold Inside Your ISA
Vanguard's LifeStrategy range is the most popular choice for UK investors who want simplicity:
| Fund | Equity | Bonds | OCF |
|------|--------|-------|-----|
| LifeStrategy 100% Equity | 100% | 0% | 0.22% |
| LifeStrategy 80% Equity | 80% | 20% | 0.22% |
| LifeStrategy 60% Equity | 60% | 40% | 0.22% |
| LifeStrategy 40% Equity | 40% | 60% | 0.22% |
All LifeStrategy funds hold over 10,000 underlying securities globally. The 80% Equity version is the most widely held by UK investors aged 30–50.
For slightly lower cost and more control, build your own with:
- Vanguard FTSE Global All Cap (OCF 0.23%) — one fund covering the entire global market
- Vanguard UK Gilt ETF (OCF 0.07%) — sterling-denominated government bonds for stability
Dividend Allowance and CGT in 2025
The dividend allowance fell to £500 in 2024/25 and remains at £500. Dividends above this are taxed at 8.75% (basic rate) or 33.75% (higher rate) — a strong reason to hold dividend-paying stocks inside an ISA.
Capital Gains Tax — The annual CGT exempt amount was cut to £3,000 in 2024/25. Basic-rate taxpayers pay 18% on gains above this; higher-rate taxpayers pay 24%. Assets inside an ISA or SIPP are fully exempt. This makes maximising your ISA each April 6 the single most valuable action most UK investors can take.
UK Gilts and Asset Allocation
UK gilts (government bonds) are the traditional defensive anchor in a UK portfolio. The iShares Core UK Gilts ETF (IGLT, OCF 0.07%) tracks the full gilt curve. For investors who want global bonds hedged to sterling, Vanguard's Global Bond Index Fund (hedged, OCF 0.15%) provides broader diversification.
Rough allocation guide:
| Age | Global Equities | UK Gilts / Bonds | Cash |
|-----|-----------------|------------------|------|
| 25–35 | 90% | 8% | 2% |
| 35–45 | 80% | 17% | 3% |
| 45–55 | 70% | 25% | 5% |
| 55–65 | 55% | 40% | 5% |
Platforms for UK Investors
- Vanguard Investor — cheapest for Vanguard funds (0.15% platform fee, capped at £375/year)
- InvestEngine — 0% platform fee for ETFs
- Hargreaves Lansdown — widest choice, higher platform fee (0.45%, capped at £45/year for ETFs)
Want to check whether your current portfolio is efficiently structured across your ISA and SIPP? Run a free portfolio analysis at /analyze to see your allocation, costs, and key action points.