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Tax allowances
Invest tax-efficiently to make the most of your money
Important information - please keep in mind that the value of investments can go down as well as up, so you may get back less than you invest.
Don't pay more tax than you need to
People rarely invest to make money for money’s sake. They invest for what matters to them. If this strikes a chord, you’ll want to make the most of whatever money you're putting aside - be it for yourself, your retirement or your children. An effective way to do this is to use your valuable tax allowances.
But what is a tax allowance? Most people get a personal allowance - an amount of income you don't have to pay tax on. Any income above this is taxed at your income tax rate. You also have tax-free allowances for things like savings interest, dividend income and capital gains. An Individual Savings Account (ISA) is a tax-exempt account - as long as you don’t contribute more than its annual allowance allows. Self-Invested Personal Pension (SIPP) contributions are eligible for tax relief within pension allowances.
Scroll down for information on tax allowances, including news on the latest government changes to allowances, and how different tax-efficient accounts compare.
Tax-efficient investing
Find out how tax-efficient accounts work in practise and how you can make the most of them.
What's new
We'll keep you updated with the latest tax allowances news.
Tax-efficient accounts and allowances
ISAs and SIPPs
Learn more about how each account works and how they could suit your future goals.
Make the most of your pension allowances
Explore what pension allowances and limits apply to you and how to maximise your pension savings.
Capital Gains Tax
Learn more about Capital Gains Tax and why you don't pay it on your ISA or SIPP investments.
Passing on wealth and inheritance
Learn more about passing on wealth to your loved ones and ways to invest an inheritance.
Investing for children
Invest tax-free for a child's future with a Junior ISA and SIPP.
Other tax allowances
Your personal allowance is the amount of income you can earn before you pay tax.
It is currently £12,570 per year.
For anything you earn above this personal allowance, you'll pay income tax. The percentage you pay increases as you enter a new tax band as shown in the table below.
If your income is above £100,000, your personal allowance is reduced by £1 for every £2 you earn above £100,000. This is known as 'adjusted net income' and changes the starting point for the tax bands. If you earn £125,000 or more your personal allowance will drop to zero.
| Personal Income Tax band | England, Wales and Northern Ireland | Scotland |
|---|---|---|
| Starter rate | N/A | 19% on earnings up to £2,827 |
| Basic rate | £20% on earnings up to £37,700 | 20% on earnings between £2,828 to £14,921 |
| Intermediate rate | N/A | 21% on earnings between £14,922 and £31,092 |
| Higher rate | 40% on earnings between £37,701 and £125,140 | 42% on earnings between £31,093 and £62,430 |
| Advanced rate | N/A | 45% on earnings between £62,431 and £125,140 |
| Additional/Top tax rate | Additional rate of 45% on earnings above £125,140 | Top rate of 48% on earnings above £125,140 |
Your personal savings allowance is how much you can make in interest from your savings each year tax-free, depending on what rate of income tax you pay.
| Personal Income Tax band | Personal savings allowance |
|---|---|
| Basic rate | £1,000 |
| Higher rate | £500 |
| Additional rate | £nil |
Scottish Income Tax rates do not apply to savings income. These are taxed at the standard UK rates.
If you're married or in a civil partnership, the marriage allowance lets the lower earner of the couple transfer £1,260 of their personal allowance to their spouse. The lower earner must normally have an income below their personal allowance of £12,570.
The higher earning spouse, who must be a basic rate tax payer, will then receive a tax credit for the amount of personal allowance transferred to them, which is then deducted from the amount of tax they would usually have to pay.
If you're in Scotland you can claim marriage allowance if the higher earning spouse's Personal Income Tax rate is starter, basic or intermediate.
If you or your partner were born before 6 April 1935, you might benefit more as a couple by applying for Married Couple’s Allowance instead.
The annual dividend allowance is £500.
A dividend is an amount of money paid by a company to its shareholders. If your dividend payment is above your allowance, you'll pay a tax rate according to your Personal Income Tax band. You do not pay tax on dividends from shares in an ISA.
| Personal Income Tax band | Tax rate on dividend income above allowance |
|---|---|
| Basic rate | 8.75% |
| Higher rate | 33.75% |
| Additional rate | 39.35% |
Scottish Income Tax rates do not apply to dividend income. These are taxed at the standard UK rates.
Expert insights and further support
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If you have more than £100,000 to invest, our financial advisers can help. Fidelity offers a no-obligation, free and informal chat in the first instance. The initial discussion lasts about 30 minutes. It’s a two-way conversation where we’ll get to learn a bit about you. And you can ask as many questions as you like too.
The adviser will also explain the advice fee structure during this initial discussion. You can then decide whether to proceed.
Find out more or call 0800 222 550 to set up an appointment.
Important information - Tax treatment depends on individual circumstances and all tax rules may change in the future. Withdrawals from a Junior ISA will not be possible until the child reaches age 18. You can't normally access money in a pension until age 55 (57 from 2028). This information is not a personal recommendation for any particular investment. If you are unsure about the suitability of an investment you should speak to one of Fidelity's advisers or an authorised financial adviser of your choice. You should regularly reassess the suitability of your investments to ensure they continue to meet your attitude to risk and investment goals.
