How much tax can you save in an ISA versus a Dealing account?

When you start investing, the first choice you have to make is which account to open. If you want easy access without locking your money up, then typically you’ll be deciding between an ISA or a Dealing account (also known as a general investment account).

Lots of people might default into a Dealing account as it seems the simplest option – but they may be robbing themselves of future gains and unnecessarily handing over money to the taxman.

What’s the difference between an ISA and a Dealing account?

The biggest difference between the two accounts is the tax you’ll pay and how much you can deposit.

In an ISA, you’ll pay no capital gains tax (CGT) or income tax on your investments – any money paid into the account will be protected from tax. In a Dealing account, you will pay tax on gains and income, once you exceed your annual tax-free allowances.

However, with an ISA you can pay up to £20,000 a year across all ISAs. Once you’ve hit that limit, you’d have to switch to a different, non-ISA account. With a Dealing account, there is no limit to how much you can contribute each year.

Because of these differences, most people will opt to pay into their ISA first and then when they have maxed out the account, they start paying into a Dealing account. However, for first-time investors it might seem easier to opt for a Dealing account – but it could cost them in the future.

How much capital gains tax can you save in an ISA?

Let’s compare investing in an ISA versus a Dealing account to see how much tax you can save.

First up, we’ll look at capital gains tax saving. Someone who invested £10,000 and left it to grow over 10 years, getting 5% returns a year after charges, would have a pot worth £16,289.

In an ISA, they could withdraw all that money and pay no tax. But in a Dealing account, if they withdrew the money, they would have a gain of £6,289 that they would have to pay tax on. A higher rate taxpayer would pay 24% tax on the gain, and if they had already used their CGT allowance, that would equal £1,509 in tax. It means that while the ISA investor would have £16,289 in their bank account, the Dealing account investor would have just £14,780.

If the investments are bigger, the tax bill is also bigger. So, those same investors putting away £10,000 a year would be sitting on a pot worth just over £132,000 after 10 years.

The ISA investor could withdraw that money with no tax bill to pay, while the Dealing account investor (if a higher rate taxpayer and had used the CGT allowance already) would pay almost £7,700 in tax – leaving them with a pot of £124,372.

If you take the example to the extreme, someone investing £10,000 a year for 30 years, earning 5% returns a year, would be sitting on a pot worth £698,000, including a gain of £398,000. That equates to a tax bill of almost £95,500 – which would be zero in an ISA.

In reality, the investor would likely stagger their selling of the investment over multiple years to make use of their tax-free allowances – but that would take a long time.

How much dividend tax can you save by investing in an ISA?

ISAs will also protect you from paying tax on dividends, which means you can either draw a tax-free income from your investments or let them automatically reinvest back in the pot and compound tax-free over time.

With a Dealing account you’d have to pay dividend tax on the money, once you’ve exceeded your tax-free allowance.

Let’s take the example of someone who is a higher-rate taxpayer and has already used their dividend allowance elsewhere. If they invested £10,000 in income-generating investments that gave them a 4% yield a year, they’d be generating £400 of income a year.

A higher-rate taxpayer pays 33.75% tax on dividends, meaning they’d be handing over £135 of that money to the taxman, leaving them with £265. In one year, that’s not ideal, but the real impact is over time. After 15 years, assuming the income stayed the same, that investor would have handed over £2,025 in tax – where the ISA investor would have paid zero.

In a more extreme example, a higher-rate taxpayer with £150,000 invested earning 4% income a year, would be paying £2,025 in dividend tax a year on that money – or £30,375 over 15 years.

How do I move my money into an ISA?

If you have a Dealing account and want to move your money into an ISA, it’s an easy process; you just need to watch out for a few things. If you’ve got cash sitting in your Dealing account and you have an ISA with the same provider, you can usually easily move that money into your ISA. Read more about how to do it with AJ Bell.

If you have investments, you can carry out what’s called a “Bed and ISA” transaction. This is where the investments in your Dealing account are sold and then re-bought back in your ISA – the platform takes care of the buying and selling and you’ll usually benefit from lower fees than doing it yourself (and less hassle). You can only do this with investments that are traded on an exchange, so if you hold investment funds, you’ll need to sell the investment yourself and then transfer the cash to your ISA and re-buy the fund there.

Find out more about how to do a Bed and ISA.

Before doing either of these, you need to make sure how much ISA allowance you have left, to avoid going over the £20,000 annual limit. You should add together any ISA contributions you’ve made this tax year, across all types of ISA and all providers, and then work out what’s left – that’s the limit of what you can move over this year.

You’ll also need to think about the tax implications. If you’re sitting on investments with lots of gains in your Dealing account, selling them will ‘realise’ those gains and mean you may have to pay tax. Lots of people use a Bed and ISA up to their annual capital gains tax-free allowance, to avoid getting a bill. For the 2025/26 tax year that would be £3,000 – you can then move more of the investment across next year.

It’s worth thinking about which investments are most tax-efficient to move over first, rather than just picking at random. The ones generating the highest returns (and so highest potential capital gains) or the highest income (and so the largest dividend tax bill) are likely to be the best to get into an ISA first.