How are investments taxed outside an ISA?

Capital Gains Tax

Selling an investment can crystallise a gain or loss.

Capital Gains Tax can arise when investments such as shares or fund holdings are disposed of for more than their allowable cost. For most individuals, the Annual Exempt Amount is £3,000 in 2026/27.

For gains from 6 April 2026, individuals generally pay CGT at 18% to the extent taxable gains fall within the unused basic-rate band and 24% above it. The calculation uses taxable income alongside taxable gains.

Dividend income

Dividends have a separate allowance and tax rates.

The Dividend Allowance is £500 for 2026/27. Dividend income above available allowances is taxed according to the tax band into which it falls.

Dividend income still counts when determining your tax band even where part of it is covered by the Dividend Allowance.

Interest & savings income

Some investments and funds produce interest rather than dividends.

Savings income can benefit from the Personal Allowance where available, the starting rate for savings in qualifying circumstances, and the Personal Savings Allowance.

The tax treatment of a fund distribution depends on its nature. Not every payment from an investment is treated as a dividend.

Investment funds

Tax can arise even when you invest through funds.

Outside an ISA or pension, distributions from funds may be taxable as dividends or interest depending on the fund and distribution. Selling fund units or shares can also create a capital gain or loss.

Accumulation funds reinvest income rather than paying it directly to you, but that does not necessarily mean the income escapes tax when the fund is held outside a tax wrapper. Provider tax statements can therefore be important.

Capital losses

Investment losses can sometimes reduce taxable gains.

Allowable capital losses can generally be deducted from gains. Unused allowable losses may also be carried forward subject to HMRC rules and reporting requirements.

HMRC

Keep records and check whether amounts need to be reported.

Providers may issue consolidated tax certificates or other statements showing distributions and transactions, but responsibility for reporting taxable income and gains ultimately rests with the taxpayer.

The reporting route depends on the type and amount of income or gains and whether you already complete Self Assessment. Complex portfolios, large disposals or unusual investments can justify specialist tax advice.