The short version
- Outside an ISA or pension, the gains, dividends and interest from your ETFs can all be taxed.
- In 2026/27 the first £3,000 of gains and £500 of dividends are tax-free. Above that, gains are taxed at 18% or 24%, and dividends at 10.75%, 35.75% or 39.35%.
- Bond ETFs usually pay interest rather than dividends, which uses your Personal Savings Allowance instead. Tax on savings income rises by 2 percentage points from April 2027.
- An ETF based outside the UK needs UK "reporting fund" status. Without it, any gain is normally taxed as income rather than as a capital gain.
Part of Getting started. For the whole process in order, see how to buy your first ETF, step by step.
- £3,000tax-free capital gains a year (the annual exempt amount), 2026/27
- £500tax-free dividends a year (the dividend allowance), 2026/27
- 10.75%dividend tax for basic-rate taxpayers in 2026/27, up from 8.75%
What a general investment account is
A general investment account (GIA) is an ordinary investment account with a platform. It holds the same ETFs as an ISA, with no yearly limit. It’s one option once your ISA allowance, £20,000 for 2026/27, is used up.
The difference is tax. In an ISA you pay no tax on income or gains, and in a pension they’re exempt too. In a GIA, three taxes can apply: Capital Gains Tax when you sell at a profit, tax on dividends, and income tax on interest.
Capital Gains Tax
Your gain is usually the difference between what you paid and what you sold for. You can deduct costs such as dealing fees.
- The allowance: the first £3,000 of gains in 2026/27 is tax-free. It was also £3,000 in 2024/25 and 2025/26.
- The rates: above that, gains made from 6 April 2026 are taxed at 18% within your basic-rate band and 24% above it.
- Your band: add your taxable gains to your taxable income to see which rate applies. GOV.UK has a worked example.
Even if there’s no tax to pay, you must report your gains on your tax return if you’re in Self Assessment and you sold assets worth more than £50,000 in the year.
Dividends
Share ETFs that distribute pass on the dividends from the companies they hold. HMRC’s offshore funds helpsheet says income from a fund set up as a company is reported as dividends, unless it’s a bond fund.
In 2026/27 the first £500 of dividends is tax-free. Above that, the rates are 10.75% for basic-rate taxpayers, 35.75% for higher-rate and 39.35% for additional-rate. The first two each rose by 2 percentage points on 6 April 2026, as announced in the November 2025 Budget.
Accumulating ETFs, which reinvest their income instead of paying it out, don’t escape. That’s covered under excess reportable income below. Accumulating vs distributing ETFs explains the two types.
Interest and bond ETFs
Bond ETFs are different. HMRC treats an offshore fund as a bond fund if more than 60% of its investments are interest-bearing or economically similar. Its income is then taxed as interest, not dividends. UK-based funds face a similar 60% test before they can pay interest.
Interest uses your Personal Savings Allowance: £1,000 a year for basic-rate taxpayers, £500 for higher-rate and nothing for additional-rate. If your other income is under £17,570, you may also get the starting rate for savings: up to £5,000 of interest taxed at 0%.
Above those allowances, interest is taxed at 20%, 40% or 45% in 2026/27. From 6 April 2027 these rise to 22%, 42% and 47%.
HMRC says fund managers should be able to tell you whether a fund counts as a bond fund, but that investors are responsible for working it out. Bond ETFs for beginners explains how they work.
Reporting fund status: the offshore fund trap
An investment fund based outside the UK is usually an “offshore fund” for UK tax. Many ETFs sold here are based abroad: even some that track the FTSE 100 are domiciled in Ireland. For each offshore ETF, the question is whether it has UK reporting fund status. HMRC’s helpsheet HS265 sets out the difference.
- Reporting fund: the fund reports its income to HMRC and to UK investors each year. When you sell, any gain is normally taxed as a capital gain, with the £3,000 allowance and the 18% or 24% rates.
- Non-reporting fund: any gain is normally an “offshore income gain”, charged to Income Tax rather than Capital Gains Tax. In 2026/27, for a higher-rate taxpayer in England, Wales or Northern Ireland, that means 40% instead of 24%.
HMRC publishes a list of reporting funds, updated monthly. Providers such as iShares and Vanguard also show a fund’s domicile and reporting status on their websites. Vanguard notes that status can differ between versions of the same fund sold through different providers, so it’s worth checking the exact one you hold. How to read an ETF factsheet shows where to look.
Inside an ISA or a pension, none of this matters: gains aren’t taxed either way.
Excess reportable income
A reporting fund has to report all its income, not just what it pays out. HMRC says UK investors are taxed on their full share of it, even if it hasn’t been distributed.
The part not paid out is called excess reportable income. It’s treated as received on the “fund distribution date”, six months after the end of the fund’s reporting period. It’s taxed as dividends, or as interest for a bond fund.
This matters most for accumulating ETFs, which pay nothing out but still have income to declare. Providers publish the figures each year in a report to investors.
The good news is that it isn’t taxed twice. Excess reportable income you’ve already been taxed on can be deducted when you work out your gain on selling.
Bed and ISA
You can’t move investments you already own into an ISA, unless they come from an employee share scheme. “Bed and ISA” is the workaround: you sell the ETF in your GIA and buy it back inside your ISA, using that year’s allowance.
It’s a real sale, so any gain falls into that tax year. It uses up your £3,000 allowance or creates a tax bill. You also pay dealing costs and the spread, and the price can move between selling and buying back.
Repeated each tax year, it gradually moves money from a GIA into an ISA, where future gains and income are tax-free.
Keeping records
In a GIA, keeping records is your job. GOV.UK says to keep records of the date and amount of each purchase, any extra costs, and what you sold for. Keep them for at least a year after the Self Assessment deadline, and longer if you filed late or HMRC starts a check.
For ETFs, that means keeping:
- every purchase and sale: date, number of units, price and costs
- your platform’s yearly statement of dividends and interest
- each offshore fund’s excess reportable income figures
- each fund’s reporting status when you bought and sold
If you buy the same ETF several times, you usually work out an average cost. Special rules apply if you buy it back within 30 days of selling. HMRC’s helpsheet HS284 explains them.
If your situation is complicated, a regulated adviser or tax adviser can help. You can check a financial adviser on the FCA register, and MoneyHelper offers free guidance.
Common questions
- Do I pay tax on an accumulating ETF if I never sell?
- For a reporting fund, yes on its income: the reinvested income is still taxable each year. On its growth, no, until you sell.
- How do I know if an ETF is a reporting fund?
- Check HMRC’s list of reporting funds, the fund’s factsheet or the provider’s website.
- Are bond ETF distributions dividends or interest?
- Interest, if more than 60% of the fund is in interest-bearing or similar investments. Then your Personal Savings Allowance applies, not the dividend allowance.
- Does any of this apply inside my ISA or SIPP?
- No. There’s no tax on income or gains in an ISA, and investment income and gains in a registered pension are exempt.
- Is the £3,000 allowance per person?
- Yes. It’s £3,000 for each individual in 2026/27. Trusts get £1,500.
This page explains how investments outside an ISA are taxed. It isn't tax advice or advice about what you should do. Tax rules change and depend on your circumstances. Investments can fall as well as rise, and you may get back less than you put in. For free, impartial guidance, try MoneyHelper. Read the full disclaimer.
Sources
- Individual Savings Accounts (ISAs), GOV.UK
- PTM024400: tax exemptions, HMRC Pensions Tax Manual
- Tax when you sell shares, GOV.UK
- Capital Gains Tax: rates and annual tax-free allowances, HMRC, updated 13 April 2026
- Capital Gains Tax rates, GOV.UK
- Capital Gains Tax: reporting and record keeping, GOV.UK
- Tax on dividends, GOV.UK
- Income Tax rates and allowances: current and past, HMRC, updated 6 April 2026
- Changes to tax rates for property, savings and dividend income, HM Treasury, 26 November 2025
- Tax on savings interest: how much is tax-free, GOV.UK
- HS265 Offshore funds, HMRC, updated 6 April 2026
- IFM13320: participants in offshore funds, HMRC Investment Funds Manual
- IFM02224: interest distributions, qualifying investments test, HMRC Investment Funds Manual
- IFM12144: overview of the offshore fund rules, HMRC Investment Funds Manual
- Offshore funds: list of reporting funds, HMRC, updated 12 October 2026
- iShares Core FTSE 100 UCITS ETF: key facts, BlackRock, data as at 12 October 2026
- General Account tax return information, Vanguard
- Financial Services Register, Financial Conduct Authority
Facts checked 13 October 2026.