Tax-efficient investing in the UK (or what order to put things into an ISA or SIPP)

Can’t fit all your investments into your ISAs and SIPPs? Then you can reduce your tax bill by following the first rule of tax-efficient investing: Squeeze the most heavily taxed investments into your tax shelters first. Happily, the pecking order for maximum tax efficiency is clear cut for most people. Tax-efficient investing priority list Shelter your assets in this order: Non-reporting offshore funds Bond funds, money market funds, UK REITs 1, and PIAFs 2 Individual bonds Income-producing equities Foreign equities (arguable, from a dividend perspective) To see why this sequence is the most tax efficient, let’s just tee up the relevant tax rates: 2026/27 Income tax Dividend tax Capital Gains Tax Tax-free allowance £12,570 £500 £3,000 Basic rate taxpayer 20% 10.75% 18% Higher rate taxpayer 40% 35.75% 24% Additional rate taxpayer 45% 39.35% 24% From 6 April 2027, tax on savings income – as paid by money market, treasury bills, and bond funds – rises to 22%, 42%, and 47% for basic,…