Mar 4, 2021 2 min read

3 differences between a stocks and shares ISA and a SIPP

Here are 3 ways in which a stocks and shares ISA is different from a SIPP
3 differences between a stocks and shares ISA and a SIPP
SIPP

A stocks and shares ISA is different from a SIPP in a number of ways. However, three of their main differences include the amount that can be paid into them each year, at what age they can be accessed, and when tax is charged on them.

Both are popular methods of planning for retirement in a tax-efficient manner. Which one is right for any individual is likely to come down to personal circumstances and preferences. Therefore, taking time to consider their pros and cons before opening them is likely to be time well spent.

Stocks and shares ISA vs SIPP: annual payments

One of the most obvious differences between a stocks and shares ISA and a SIPP is how much money can be paid into them in each tax year.

With ISAs, there is a £20,000 annual allowance. This means that it is not possible to pay more than that amount into them – even if withdrawals have been made. The amount that can be paid into an ISA is always subject to change depending on government policy, so it may or may not remain at that level in future.

The annual tax-exempt amount that can be paid into a SIPP is £40,000. This is also subject to change depending on government policy. It’s significantly higher than an ISA’s annual allowance, which may be relevant for some people depending on their annual income and how much they wish to pay into their pension each year.

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