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GIA vs ISA: How should you invest?

Both offer investors a way to trade on the stock market with ease, but what’s the difference between a GIA and an ISA?

Please remember, investment value can go up or down and you could get back less than you invest. The value of international investments may be affected by currency fluctuations which might reduce their value in sterling.

Investing is a great way to make your money work for you. You can maximise your savings beyond the traditional interest you might get from your high street savings account.

There are several different ways to invest, we’re looking at GIAs (general investment accounts) and stocks and shares ISAs; what makes each unique and which one you should be using.

What is a GIA?

A general investment account (also known as a GIA, trading account, or investment account) is your basic account for investing on an online platform. They’re flexible and able to hold multiple currencies and most investment types. And there isn’t a limit on how much money you can add each year to invest with.

What is an ISA?

An ISA (or Individual Savings Account) is a savings account with a tax-efficient wrapper. You can hold cash to earn interest or invest in the UK or international markets. 

There are different types of ISA depending on how you want to grow your savings, and what they all have in common is the protection they give your savings from income and capital gains taxes. But there's a limit on how much you can add to them each tax year. 

Today we're focusing on the Stocks and Shares ISA, which just like a Trading Account, lets you invest your cash in the stock markets.

How do a GIA and an ISA differ?

Both a GIA and an ISA allow you to invest in a broad range of investments, including stocks, funds, ETFs, bonds and guilts. Both even allow you to invest internationally as well as in the UK market – but there are differences. 

Tax is always something to be aware of when it comes to investing, but it’s even more important when choosing between a GIA and ISA.

There aren’t any tax protections with a trading account. Once you’ve used your personal or dividend allowance, you’ll need to consider any capital gains and income tax you could be liable for.

An ISA is a tax-efficient product, meaning you don’t pay any income tax if you receive interest or dividends, and you don’t pay any Capital Gains Tax if you make a profit. But this means there are rules set by HMRC over how much cash you can contribute each tax year, and what you can invest in.

Adding cash
There isn’t a limit on adding cash to a trading account, but your ISA allowance determines how much cash you can add to your ISAs each tax year. It’s currently set at £20,000 and covers all the types of ISA you have. So, if you have more than one, collectively you can’t add more than £20,000 across them all.

Eligible investments
A GIA is your basic account so there aren’t many limits to the types of investments you can invest in or how much cash you add to invest with. So long as your provider supports the investment, your trading account can usually support it. 

HMRC sets rules on what’s considered ISA eligible so not all investments can be held in an ISA. Your typical investments like ones listed on the UK and major international exchanges are usually eligible, but a trading account doesn’t have these restrictions.

GIA vs ISA comparison

Are there any limits for opening an account?You have to be 18 years old to invest.You need to be a UK resident for tax purposes, and 18 years old.
How much cash can I add?There’s no limit. With a GIA you can add as much cash as you want.You’re only able to add up to £20,000 each tax year. But this limit covers all your ISAs, with every provider.
Do I have to invest in GBP?A GIA can hold and trade in multiple currencies. You’re not limited to only trading in GBP.You can only add and hold cash in GBP.
What investments can I access?There aren’t any restrictions. GIA’s can hold most investment types, in most markets.With an ISA, you can only invest in ISA eligible holdings. And they must be on a recognised stock exchange to qualify.
What are the tax benefits?There aren’t any tax protections with a GIA.You’re protected from UK income tax on income, and Capital Gains Tax on your profits.
Can I access and withdraw my cash?A GIA is instant access. You can withdraw your cash anytime, in any supported currency.An ISA also gives you instant access. But you can only make a withdrawal in GBP.

Choosing between a GIA and ISA

Choosing between a trading account and an ISA is unique to everyone, and it really depends on your own goals and how you plan to invest. 

An ISA is a good place to start if you’re new to investing or don’t plan to use all your ISA allowance. This way you don’t need to worry about tax as much and get to keep more of the profit you make.

But if you’ve used your ISA allowance or you’re planning to invest in things that aren’t ISA eligible a GIA will allow you to do that. 

The best thing is, you don’t have to pick between them if you don’t want to. You can have both.

How to invest with a GIA or ISA

To invest in either a Trading Account or Stocks and Shares ISA, the process is the same. You’ll first need to choose a provider you want to invest with by looking at their platform and what their charges are. 

Once you’ve applied and opened your account, you’ll be able to add your cash and start on your investing journey.

With ii, both an ii Trading Account and ii Stocks and Shares ISA are included in your monthly plan. So you can have both for no additional cost.

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